Kvaerner Sell-Off Hits Snag In Finland

The Polish Gdynia shipyard fears Finland's government may scupper its bid to take over two Finnish yards put for sale by the Kvaerner, Gdynia's chief executive said. "On merit, our merger is the best business initiative within the European shipbuilding industry," Janusz Szlanta said. "If the Finnish government does not intervene, we will succeed," he said. "But you cannot win with a government, and it will not be a dishonor for us to lose with them." Industry sources say Gdynia's bid is the best offer Kvaerner has, but it received a cool reaction from Masa-Yard's management, which has formed a rival consortium. The Polish challenge - the first major attempt by a company from the former East Bloc to expand into the European Union - stirred the Finnish government as well. Industry Minister Erkki Tuomioja said earlier this week the government supported a "Finnish solution", adding that state investment funds could back the consortium led by Masa-Yards Chief Executive Martin Saarikangas. The Poles are afraid that apart from bolstering the rival bid, the government may try to fend off their challenge by threatening to withdraw subsidies from Masa-Yards. Finnish newspapers also sounded an alarm, suggesting Gdynia might aim to destroy a more advanced competitor or that it was serving as a frontman for a larger Asian predator. Szlanta, a 46-year old former banker who is also a major stakeholder in the Gdynia yard, dismissed the allegations as a smear campaign. He said Gdynia aimed for a friendly takeover, and despite some necessary restructuring saw no need for group layoffs at either the Helsinki or Turku yards. It was also ready to offer senior positions in the new group to the current Masa management. "Joining forces with Masa-Yards would be ideal in the era of globalization," Szlanta said. "This is a golden opportunity for a European group to take a leading position in the industry." Fit Like A Glove? Masa's expertise in state-of-the-art cruise ships and liquid natural gas carriers (LNGs) would complement Gdynia's strength in mainstream shipbuilding and its low costs, Szlanta says. Together, the two companies would become the world's fifth largest shipbuilder, with turnover likely to reach $1.5 billion in two years time and a labor force of some 15,000 people. Gdynia's success in boosting profitability despite completely lacking subsidies - it netted $30 million last year on $400 million sales - aided by the superior technology of Masa-Yards would enable them to mount a tough challenge to the industry leaders in South Korea and Japan. Szlanta refused to say which banks were supporting Gdynia's bid, but said the acquisition would be financed by combining loans, own funds and a public share offering next year. Szlanta declined to value his bid, but according to industry estimates the Poles would need around $300 million, including working capital tied in Masa Yards. Kvaerner was likely to make the final decision on which bid to accept by mid-October, Szlanta said, but added Gdynia might not agree the deal if the Finnish government firmly opposed it. He said, however, that he expected the government to be fair, not least because a decision to block Gdynia would cast doubt on the European Union's true approach to free competition and its readiness to accept new members from the East. "Poland is negotiating entry into the EU and if it now turned out that Polish firms are not welcome to invest in the West, that would be a negative signal," he said.