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Italy’s Fincantieri Buys 10 STX Shipyards, Doubles in Size

Jan. 14, 2013 - 08:28PM   |  
By TOM KINGTON   |   Comments
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ROME — Five years after it took over the U.S. yard building Lockheed Martin’s version of littoral combat ships, Italy’s Fincantieri has continued its streak of globalization, buying 10 shipyards from South Korean shipbuilder STX and doubling in size thanks to the operation.

The state-controlled Italian firm, which has struggled at home with defense cuts and with unions over job and budget cuts, has found more freedom to move overseas in recent years, and its latest purchase shows how European shipbuilding can stand up to its mighty Korean competitors.

The 455 million euro ($596 million) deal, signed Dec. 21, which Fincantieri CEO Giuseppe Bono said ushered in “a new era” for his firm, involves the purchase of 50.75 percent of STX’s unit building offshore vessels for servicing oil rigs — a market seen as growing as more rigs are built farther out to sea to chase oil and gas reserves.

“Offshore is one of few shipping sectors with growth prospects, particularly in Brazil,” said Angelo Scorza, director of Italian shipping industry publication Ship2Shore.

The STX unit, known as STX OSV, controls 10 shipyards in Norway, Romania, Brazil and Vietnam, employs 9,200 people and sees revenue of 1.6 billion euros. Adding that to Fincantieri’s eight yards in Italy, three yards in the U.S., 10,000 staff and 2.4 billion euros in revenue bulks the firm up by 100 percent in an operation paid for with the company’s war chest and bank loans and backed by the Italian government.

After the expected closing of the deal by April, Fincantieri will launch a public tender for the remaining shares, bringing the total value of the deal to about 900 million euros.

The result would put Fincantieri among the world’s top five shipbuilders, sitting behind four Korean firms, led by Hyundai, with 14.4 billion euros in revenue. Ahead of Fincantieri at No. 4 is STX, with 5.4 billion euros.

“Growing in size like this could help Fincantieri achieve its ambition of launching an IPO [initial public offering],” Scorza said.

In a statement, Fincantieri added that the move would allow it to diversify as spending on military vessels dipped — and as it faces increased competition in the cruise ship sector, where it has found a rich profit seam, but where demand is due to drop from 12 to 13 vessels a year to six to eight.

Bono has sought an IPO for the firm in the past, only to be thwarted by Italian politicians, and has held talks with Italian unions and the government to winnow the workforce at Italian yards. It is now building FREMM frigates for the Italian Navy — albeit fewer than planned — and this month delivered a corvette and patrol vessel to the UAE Navy.

In 2008, the firm spent $120 million to take over Manitowoc Marine Group, and through it the Marinette Marine yard in Wisconsin, which builds littoral combat ships for Lockheed Martin.

Purchasing a piece of STX marks a turnaround for the Italian company, which lobbied five years ago to keep the Koreans out of Europe when STX took a controlling stake in Norway’s Aker yard.

At the time, Fincantieri sought in vain to create a European buyout of Aker, with the idea of creating a shipbuilding consortium modeled along the lines of Airbus. That plan came to nothing when the European Union gave the green light to STX’s acquisition bid.

Now, after years of booming growth thanks to low labor costs and strong Asian markets, STX has become a victim of slowing demand and is seeking to drive down its debt, hence its need to sell units. Fincantieri is acquiring the offshore activity originally managed by Aker.

STX has, however, retained ownership of its cruise ship building activity in Europe and its control of France’s Saint-Nazaire shipyard.

Fincantieri’s offer price per share for STX OSV was a 17.5 percent discount on the three-month average share price, revealing STX’s desire to sell, analysts said.

“This can be seen as a kind of revenge for Fincantieri,” Scorza said.

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