Essar sets sail for $700 mn Bulgarian shipping buy
Ruias-owned Essar Shipping and Logistics (ESLL) is in the race to take over Bulgarian public sector shipping company Navigation Maritime Bulgare (Navibulgar). The 106-year-old Bulgarian company is valued at around $700 million.
By Nevin John, TNN |
MUMBAI: Ruias-owned Essar Shipping and Logistics (ESLL) is in the race to take over Bulgarian public sector shipping company Navigation Maritime Bulgare (Navibulgar). The 106-year-old Bulgarian company is valued at around $700 million.
Sources said the Cyprus-registered ESLL is the only Indian-owned company in the fray, vying with over a dozen international majors for the control of Navibulgar. Bulgaria, which is expected to sell 70% of Navibulgar, is likely to provide an option to the chosen investor to buy the remaining shares in future.
For Essar, the acquisition of Navibulgar will mean strengthening its operations in the Black Sea basin as the competition for oil tankers in the region hots up. Navibulgar operates a fleet of 72 ocean-going vessels with a total capacity of over 1.3 million dead-weight tonnage (DWT).
It reported a 44% fall in net profit last year to $15.06 million. The revenues had remained almost unchanged at around $250 million. Since most of the assets are old, the company is notorious on port state control detention lists, with ships sinking or running aground frequently.
“As a group, we keep looking at growth opportunities. However, it is not our policy to comment on any specific proposal,” said an Essar spokesperson. Last week, Bulgaria’s privatisation agency said the sale of a majority stake in Navibulgar has drawn the interest of 23 potential bidders, including ESLL.
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Other companies that are interested include the Swiss firm Crude Oil and Derivatives Trading SA, the Greek companies Athenian Sea Carriers and Chartworld Shipping Corporation, Dutch-based Muller Maritime Holding BV, TVA Shipping GmbH from Germany, the French CMA CGM SA and Italian firm Sider Navi SpA. A few companies from the Czech Republic, the UK and the Nevis Island in the Caribbean have also expressed interest in the Bulgarian shipping major. The other Bulgarian investors among the interested parties are Piraeus Bank Bulgaria, Bulbrokers, Forem Consulting and Chimimport.
ESLL has collected the bid documents and expected to submit the request for qualification (RFQ) by next week, said sources close to the development. Letters of interest and RFQ from prospective investors are expected by September 10 and the qualified bidders will be announced on September 28. The indicative offers will be submitted on October 18.
In February, the Bulgarian government had approved a sell-off strategy under which the country invited shipping operators to bid for 7.6 million shares of Navibulgar. Sources said Bulgaria’s rush to complete the sale proceedings stems from pressure to meet European Union modernisation goals laid down as part of its entry—on January 1, 2007—into the EU.
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According to conditions laid out by the company, privatisation offers could be filed by bidders or consortiums that had hired ships with a minimum 1.3 million DWT in each of the past three years. Any consortiums must have a strategic investor that has a minimum share of 70% of the enterprise’s capital. The other requirement is that the firm had to have concluded contracts for operational ship management and to own the relevant document, issued in accordance with the International Codex for Management of the Safe Ships Exploitation and Pollution Prevention.
The bidders were also asked to submit a letter of engagement for finance, issued by a bank or a financial institution having a proved credit rating. The bank also had to have provided credit for the purchase or renovation of ships for at least e3 billion.
The Essar group had recently restructured its shipping, logistics and oil terminal businesses by launching ESLL as a parent company registered in Cyprus. The restructuring was aimed at tapping the foreign market. ESLL owns 77% of Essar Shipping (ESL), currently listed on Bombay Stock Exchange (BSE).
Essar Shipping owns a fleet of 26 vessels, including very large crude carriers (VLCCs), tankers and bulk carriers. It is engaged in servicing the transportation needs of major global and Indian oil companies such as Shell, Exxon Mobil, Chevron BP Aramco, Texaco, Bharat Petroleum and Indian Oil Corporation.
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