Kvaerner, RGI to Establish Joint Ownership for Shipyards

Wednesday, October 23, 2002
Aker Kvaerner and Aker RGI have entered into an agreement to establish a joint ownership for their wholly owned shipyards in Germany, respectively Kvaerner Warnow Werft and Aker MTW. Among other conditions, the agreement is dependent on approval from Aker Kvaerner's and Aker RGI's lenders. The aim is to implement the new ownership by the end of 2002. Aker Kvaerner will own 40 percent of the two yards. In February Aker Kvaerner and Aker RGI began working closely together in shipbuilding. At that time the parties set up a jointly owned management company, Aker Kvaerner Yards, which has since managed the companies' 14 shipyards in Europe, USA and Brazil. Together these yards constitute one of the largest shipyard groupings in the world. Both Aker RGI and Aker Kvaerner have stated that they share an ambition to combine their shipbuilding activities when the time is right. Now the two Groups take the first step by merging their German shipbuilding activities, in which immediate synergies have been identified. Since February, the management company Aker Kvaerner Yards and the management at each yard have studied alternative forms of cooperation. A joint leadership team was established earlier this year. Cooperation between the yards will now move one step further through the establishment of a joint ownership, and the German shipyards will further strengthen their competitiveness. Aker Kvaerner will own 40 per cent in the structure, while Aker RGI will hold the remaining 60 per cent through its subsidiary Aker Yards. The division of ownership has been determined in negotiations between the parties. Aker Kvaerner has obtained 'fairness opinions' from both Orkla Enskilda Securities and DnB Markets, which confirm the valuation of the two yards. The transaction is conditional on a due diligence investigation of the two yards. From the date of the combination Aker Kvaerner will account for the investment using the equity method (key figures for the two yards are enclosed). The transaction as such has no accounting effects for Aker Kvaerner. All outstanding issues between Aker Kvaerner and the European Commission concerning subsidies will remain with Aker Kvaerner after the merger. Aker Kvaerner's Chairman of the Board, who controls Aker RGI, has not participated in Aker Kvaerner's handling of the combination of the two yards. Status U.S. and Finnish yards Aker Kvaerner Yards plays a central part in the improvement work under way at all Aker Kvaerner's shipyards. Since February the US yard Kvaerner Philadelphia has made considerable progress in its conversion from a marine yard to a commercial shipyard. There has been a positive trend in productivity development and an important agreement has been reached with the trade unions at the yard covering pay and working conditions in the period up to 2006. In May Kvaerner Philadelphia signed a contract with U.S. shipowner Matson for the delivery of the first two container vessels, which are now under construction. In addition the yard has met about USD 80 million of its obligations to the authorities in the region with respect to the expansion of the yard. In Finland improvement initiatives continue at Kvaerner Masa-Yard's facilities at Helsinki and Turku. The two yards have already improved their operation, with positive results so far this year. At present the yards are engaged in the construction of four cruise-ships. The Norwegian owner Color Line recently confirmed an agreement of intent for a new cruise-ferry order for delivery in 2004. Nevertheless there is a need for further orders.
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