shougang weighs stake in australia ore miner, page-3

Have big fleet to maintain, about 50 per cent of Shougang International's steel plate is for shipbuilders and the rest for the infrastructure and machinery industries.



Shougang, P&O fleet deal makes maritime giant


CHRISTINE CHAN
Apr 27, 1998



Peninsular and Oriental Steam Navigation (P&O) has concluded a deal with mainland steel giant Shougang Group to merge their bulk shipping operations into a group with US$633 million in assets.
The agreement, clinched last Friday after months of talks, forms one of the world's largest modern capesize dry bulk carrier fleet, grossing more than four million tonnes deadweight, the companies said.



London-listed P&O will hold 50 per cent of Associated Bulk Carriers with the remainder held equally by Shougang Holdings (Hong Kong), a Hong Kong arm of Beijing-based Shougang Group, and its 39.63 per cent-owned Hong Kong-listed Shougang Concord International Enterprises.

Associated Bulk, incorporated in Hong Kong, would combine P&O Bulk Shipping's experience and Shougang's recently delivered capesize bulk fleet with the international presence of the two groups within the Atlantic and Pacific regions, the companies said.

Under the agreement, P&O would contribute to Associated Bulk's entire fleet of 17 capesize carriers including 10 owned or leased vessels, valued at $311 million.

In return, it would transfer $230 million of debt and lease obligations to the joint venture and receive $10 million of convertible preference shares plus 50 per cent, or 71.5 million ordinary shares, of Associated Bulk, P&O said.

P&O would continue to guarantee certain vessel-lease and charter commitments of Associated Bulk, with $100 million of Associated Bulk's debt. In return for its guarantee, P&O would receive fees, the company said.

Last year, P&O Bulk Shipping had turnover of $175 million with net operating assets of $355 million and operating profit of $2.3 million, the company said.

As part of the deal, Shougang Holdings will contribute four vessels to Associated Bulk, valued at $185 million and transfer $149 million of debt to Associated Bulk, while Shougang Concord will contribute three vessels valued at $137 million and two chartered vessels in exchange for the transfer of US$101 million of debt.

Each of Shougang Holdings and Shougang Concord would have 25 per cent, or 35.75 million ordinary shares in Associated Bulk, Shougang Concord said.

Associated Bulk, will have $633 million of assets, financed by $480 million of borrowings, $10 million convertible preference shares and $143 million ordinary shares.

Shougang Concord said the agreement had to be approved by shareholders, and Associated Bulk needed to sign legally binding finance agreements on bank borrowings. The agreement was expected to be completed by June 17.

The Associated Bulk board will have four voting directors; two from P&O and one each from Shougang Holdings and Shougang Concord.

P&O's Karl Timmermann has been appointed the first chief executive of Associated Bulk. Shougang's Wang Chunli has been named first deputy chief executive.