Howard Smith To Jettison Tow Business?

Howard Smith Ltd.'s likely sale of its Australian and U.K. towage operations to Adsteam Marine Ltd would enable the sluggish company to focus on hardware and industrial supplies distribution, analysts said. The deal was also viewed as a positive for acquisitive Adsteam, already the largest operator of marine towage services in Australia's mature market. Adsteam expanded into the U.S. market in 1999 and would welcome a foothold in the U.K. market.

Hardware retailer, industrial supplier and towage operator Howard Smith announced earlier that it was in talks with Adsteam but said no agreement had yet been reached. "We would see it as positive in that it's focusing the business of Howard Smith on the distribution side," said associate director Glynn Meth at Rothschild Australia Asset Management Ltd.

The towage sale would also focus Howard Smith's activities geographically on Australia and New Zealand. As recently as last month, Howard Smith said it had no divestment plans for the unit, despite pressure from some institutional holders for Howard Smith to become more focussed on the hardware business rather than continuing as a conglomerate. Howard Smith reported in February a flat net profit of A$54.10 million for the six months to end-December and managing director Ian Tsicalas forecast difficult trading conditions for the remainder of the 2000/01 year.

Adsteam bought a 50 percent stake in U.S. maritime services unit Northland Holdings Ltd in 1999, its first major purchase since listing in 1997, and the U.S. unit has since pursued earnings accretive acquisitions within the U.S. market. Going forward, Adsteam has said it aimed to be a leader in the global rationalization of the maritime services industry and recognized that the Australian market is already mature. "Although it's not a growth business, it does achieve high returns," Meth said, referring to the Howard Smith unit.

Analysts said the deal could attract the attention of Australia's anti-monopoly watchdog, the Australian Competition and Consumer Commission, but existing Howard Smith-Adsteam joint ventures at several Australian ports would be likely to soothe such concerns. - (Reuters)