STX takes control of Norweigian rival, Aker Yards. Options

[CJK]

LONDON -

Share in Norwegian shipbuilder Aker Yards soared by more than 20% on Tuesday after a South Korean conglomerate snapped up a large stake in the company.

Aker Yards, which is Europe's largest shipbuilder, reacted coolly to the revelation that STX of South Korea had acquired a 39.2% position for 97 Norwegian kroner ($17.91) a share, putting the value of the deal at $800 million.

Chairman Svein Sivertsen of Aker said: "We will now gather all relevant information in order to review the strategic alternatives available in order to maximize the value of Aker Yards." Sivertsen added that the "board's main task is to consider the interest of all shareholders."

Shares in Aker Yards, which have been in a slump ever since the company issued a profit warning in July, soared at the prospect of one of Asia's largest shipping companies becoming a long-term investor. Aker Yards was trading up 15.01 Norwegian kroners ($2.77), or 21.3%, at 85.50 Norwegian kroners ($15.79), in midday trading in Oslo.

Despite the considerable markup, shares in STX rose at the prospect of the firm gaining its first foot in the European market. Its stock ended the day up 14,500 Korean won ($15.78), or 14.0%, at 118,000 ($129.51), in Seoul .

"I think the price seems fair," said Jan-Sigurd Sorensen, an analyst at Nordea Securities in London.

Aker Yards (other-otc: AKYDF - news - people ) has shipyards in Brazil, Germany, Finland, France, Norway and Romania, and it builds vessels for the offshore oil industry as well as cruise and ferry services.

Sorensen said Aker Yards' cruise ship division would be particularly attractive for STX. Demand for cruise vessels is expected to rise, driven by economic growth and rising consumer spending, particularly in emerging markets.

He added that once Aker Yards completed its Finnish ferry projects -- which was the main reason for the earlier profit warning and subsequent disappointing second-quarter figures -- its portfolio would be a lot more attractive and increase the company's profit margins. The high costs involved in ferry building make it a low margin business.

STX said it planned to remain as a long-term minority investor in Aker. "Aker Yards is an accomplished and recognized leader in the shipbuilding business, and our strategic stake in the company represents a solid opportunity to gain valuable exposure to attractive industry segments," said STX Chairman Duk-Soo Kang.

The STX unit STX Shipbuilding is one of Asia's leading shipbuilders.

Thomson Financial News contributed to this article.

http://www.forbes.com/markets/2007/10/23/a...3markets09.html

[CJK]

STX embarks on new business voyage: Cruise Ships

STX Shipbuilding has bought a majority stake in Oslo, Norway-based Aker Yards ASA, the world's second largest cruise ship builder, for $800 million. Until now, no world-class level Korean shipbuilders have been involved in the large cruise ship building industry. It was hard for them to break open the gate of the European shipbuilders' near-monopolistic system, since cruise ship building requires special designing, planning, and interior technology. Mitsubishi Heavy Industries of Japan attempted several years ago to build cruise ships, but only ended up running up a deficit of hundreds of billions of won (US$1=W918). STX has not been able to develop the needed technology and know-how to build cruise ships on its own. But the company found a solution with its takeover of the Norwegian shipbuilder. Hopefully this overseas endeavor will prove fruitful for STX.

In the shipbuilding industry, cruise ships are highest value-added vessels. A large container ship costs US$120 million, a large oil tanker $140 million, and a liquid natural gas ship $240 million. But a large cruise ship is far more expensive, costing $500 million to $700 million. The shipbuilding cost per ton is $5,500 for a cruise ship, seven times as high as that of a large oil tanker ($800 per ton). Cruise ships cost more because of their hotel-style auxiliary facilities.

This post has been edited by CJK: Oct 26 2007, 11:38 AM