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Teekay Acquisition May Lead to Another Merger

Maritime Activity Reports, Inc.

March 9, 2001

International tanker group Teekay's acquisition of a majority of the world's biggest shuttle-tanker owner Ugland Nordic Shipping could lead to a second merger to dominate the sector, with Statoil's tanker subsidiary Navion, analysts said. Norwegian energy giant Statoil is close to being privatized, and the future direction of Navion, in which it holds 80 percent, is uncertain. Co-owner of Navion, Norway's Rasmussen group, last month bought a major stake in Ugland, and analysts said this was the first step towards an Ugland-Navion merger. Both Teekay and Rasmussen now seem open to the possibility that one huge merger involving all four parties could still go ahead. Ugland Nordic has a fleet of 14, and four more on order. Navion owns nine, but is an active charterer and therefore controls about 21 ships, or one third of the world market. Teekay accumulated a 56 percent of Ugland on Tuesday at NOK 140 per share and has made an offer for all outstanding shares at the same price. "This is a very smart strategic move," said analyst Jim Winchester of investment bank Lazard Freres. "I see this as the first step in a two step consolidation of the North Sea shuttle tanker market." Rasmussen was surprised on Tuesday by news that Teekay had taken a majority stake in Ugland. "We thought when we picked up that 33 percent that nobody (else) would be too interested (in taking over Ugland Nordic)," Rasmussen's Dag Rasmussen said. "We obviously made a miscalculation." But he did not rule out a possible Rasmussen-Navion-Teekay merger. "That depends on the terms," he said. Teekay's Bjorn Moller said, "We view Navion as an important customer for UNS... Teekay is very customer focused, and we will be open to any discussions to understand what our customer wants from us." "If the customer wants to bring us closer in, that's a discussion we'd be pleased to listen to." He said he had introduced himself to several senior people at Navion, but that the issue of a merger had not been discussed. Dag Rasmussen said the company was considering its options on the Teekay offer for its stake in Ugland Nordic. Some analysts, however, foresaw problems with a tie-up between Teekay and Navion. Nicolai Heidenreich of consultants Marine Money Capital Partners said that Navion's main shareholder Statoil was a major user of shuttle tankers, and might therefore object to a new merged company, which could hold as much as 75 percent of the market. Teekay's Moller said he was aware of that complication. "How dominant Statoil would want any one player to become is a question, and they might well steer the process," he said in a conference call. "With the number of ships we (Teekay) have out to them, we're in an interesting position," he added. With or without Navion's involvement, Moller was upbeat on consolidation in the sector as a whole. "Will there be more (consolidation)? There will be some dynamics unfolding in the future. There's a number of smaller players in that market," he told Reuters. Analysts said that anti-trust issues would not be a concern, because shuttle-tankers are essentially a sub-sector of the Aframax market, which has very low barriers to entry. - (Reuters)

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