Kvaerner ASA has postponed a planned sale of its Masa-Yards Finnish shipbuilding unit in a new setback to its goal of exiting shipbuilding.
Kvaerner said it had failed to find a right buyer for Masa-Yards, which specializes in building cruise ships and has an order reserve of $2.6 billion, and would instead concentrate on raising the unit's profitability.
"Talks (about a sale of Masa) have not led to a satisfactory agreement," the company said in a statement. "As a consequence, Kvaerner will now concentrate on carrying out the improvement program set in place to obtain satisfactory results." Kvaerner said the decision would not affect its goal of cutting huge debts.
Kvaerner had planned to sell Masa as part of a failed goal, set a year ago by new Kvaerner CEO Kjell Almskog, to dispose of all its shipyards by the end of 1999 in a sweeping restructuring.
So far it has sold nine of 14 shipyards but still has to sell major businesses including Masa-Yards, Warnow in Germany and a yard in Philadelphia. It said it was closest to selling Philadelphia.
"People would like to see Kvaerner selling out of this shipbuilding business," one analyst said. "It has to become more focused." But the fact that Kvaerner said its debts would not rise gave some support.
Kvaerner said the market was buoyant and that the cruise business was growing by 5-10 percent a year. "The decision to call off the present sales efforts does not imply that Kvaerner has departed from its long-term strategic objective to make a complete exit from shipbuilding," Kvaerner said.
Leading Polish shipyard Gdynia said it had not given up hope of buying a 20-25 percent stake in Masa-Yards as part of a goal of international expansion.
"I confirm our interest in taking part in the sale of the Finnish shipyards," Chief Executive Janusz Szlanta said Kvaerner also said Masa-Yards Chief Executive Martin Saarikangas had decided to step down as soon as a successor was named. He told a news conference in Helsinki that talks on a sale were unlikely to restart this year.
"The decision concerns only Masa-Yards...the German Warnow yard is on the for-sale list and Philadelphia will be sold," he said.
Kvaerner said that Carnival Corp., which has two Eagle class cruise ships on order at Masa, backed Kvaerner's decision. Carnival and Royal Caribbean Cruise Lines had been part of one group of investors interested in buying Masa.
"Carnival supports Kvaerner's decision to retain the yard for the time being and to implement a range of improvements at Masa-Yards," Carnival chairman Micky Arison said. Kvaerner said that its goal was to "secure the working capital requirements of Masa-Yards through off balance sheet third party financing. In this way the ownership of Masa-Yards is not likely to materially affect Kvaerner's current program for debt reduction." "The group's aim, as announced in the 1999 restructuring plan, to reduce debt by at least $1.0 billion, remains in place," it said. - (Reuters)
Gdynia Refuses To Quit
Poland's Gdynia has not given up hope of buying a stake in Finnish shipbuilder Masa-Yards, even though Kvaerner has put off the sale. Gdynia Chief Executive Janusz Szlanta said that Gdynia wanted to boost cooperation with Masa-Yards while waiting for Kvaerner to resume the sell-off. "I have accepted Kvaerner's decision. But at the same time I confirm our interest in taking part in the sale of the Finnish shipyards," Szlanta said. Kvaerner said it is putting off a planned sale of Masa-Yards after failing to find the right buyer. It had been in talks with U.S. cruise groups Carnival Corp and Royal Caribbean, as well as a Finnish bidder. The company said, however, that it maintained its long-term strategic aim of exiting shipbuilding. "Regardless of the future of our equity engagement in Masa-Yards, we would like to develop business cooperation between the Masa-Yards group
and the Gdynia group
," said Szlanta. Gdynia wanted to buy a 20-25 percent stake in Masa-Yards as part of a plan of international expansion and diversification.
Gdynia produces container ships as well as vessels carrying cars and chemicals, while Masa-Yards is a leading cruise ship builder. Szlanta said joint operations would benefit both shipyards by creating synergies. "Masa-Yards' strength -- the excellent technologies of a leader in cruise liner building -- would be supplemented by the technical potential and labor skill of the Gdynia group," he said. Gdynia is one of the few Polish yards to prosper in the free-market economy introduced after the 1989 fall of communism, which badly hit most of the country's heavy industries. After a radical restructuring in the early 1990s, Gdynia is now the world's eighth biggest shipyard.