Nedlloyd acquires P&O’s 50% stake in P&ONL
Rotterdam-based Royal Nedlloyd NV said today it plans to buy out Peninsular & Oriental Steam Navigation Co., its joint venture partner in P&O Nedlloyd Container Line, in a $602-million deal that will turn the container shipping joint venture into an independent, stock market-listed company.
Royal Nedlloyd has agreed to acquire London-based P&O’s 50-percent interest in P&O Nedlloyd Container for about 215 million euros ($267 million) in cash and about 270 million euros ($335 million) in Royal Nedlloyd stock at current share prices, representing 25 percent of its shares.
The deal marks the culmination of years of discussions between Royal Nedlloyd and P&O about the future ownership and structure of P&O Nedlloyd, which frustrated P&O’s intent to reduce its investments in container shipping.
In effect, P&O Nedlloyd will be transformed from a joint venture to an independent company listed on the stock market.
To finance the cash payment to P&O, Royal Nedlloyd announced a rights issue to raise about 190 million euros ($236 million).
On completion of the buyout, Royal Nedlloyd will be renamed Royal P&O Nedlloyd and will consolidate P&O Nedlloyd as a 100-percent subsidiary. The company will continue to use the trade name P&O Nedlloyd for its container shipping operations. Royal Nedlloyd, which also owns 50 percent of the Dutch airline Martinair, plans to sell its stake in the airline.
Royal P&O Nedlloyd will be headquartered in Rotterdam, the traditional base of Nedlloyd, while the “operational headquarters” for its container shipping operations will be in London, where P&O Nedlloyd has been.
In a joint statement, Royal Nedlloyd and P&O said P&O Nedlloyd “will benefit from increased strategic and financial flexibility to grow and develop its position as one of the leading global container shipping companies.”
However, they said the transaction will have no impact on P&O Nedlloyd’s business, its employees or its day-to-day operations and services provided to its customers.
Philip Green, recently appointed chief executive officer of P&O Nedlloyd, will become CEO of the Royal P&O Nedlloyd. P&O and Royal Nedlloyd added that the management team, led by Green, “will be able to focus on positioning the company to capitalize on the current upswing in the container shipping industry cycle.”
Haddo Meijer will step down as CEO of Royal Nedlloyd, to become a non-executive director of Royal P&O Nedlloyd. Meijer said the proposed transaction will “meet the objective of effectively creating an independent listing for P&O Nedlloyd.” He urged Royal Nedlloyd shareholders to support the transaction.
Jeffrey Sterling, chairman of P&O said P&O Nedlloyd “will be able to use its new independence to reinforce its position as one of the world’s leading container shipping companies.”
The transaction is subject to approval by Royal Nedlloyd’s and P&O’s shareholders, completion of a rights issue by Royal Nedlloyd, regulatory approvals and admission of the rights issue shares and the shares that are to be issued to P&O for listing on Euronext Amsterdam, the Amsterdam stock exchange where. Royal Nedlloyd’s stock is traded on Euronext stock exchange in Amsterdam. In addition, the shares are traded in the United States through American depositary receipts.
Royal P&O Nedlloyd’s board will comprise two executive directors — Green and a chief financial officer — and seven non-executive directors. The non-executive directors will be Andrew Land as chairman, Neelie Kroes, Haddo Meijer, Robert Woods, Nick Luff and two independent appointees. Royal Nedlloyd’s management structure will change from the dual system of a supervisory board and an executive board to one of a one tier board.
P&O’s Sterling and Royal Nedlloyd’s Leo Berndsen will step down as co-chairmen of P&O Nedlloyd.
P&O Nedlloyd’s move to a public company comes as stocks in shipping companies enjoy a revival amid the robust recovery of volumes and rates in container shipping. TUI AG, Hapag-Lloyd’s parent company, has also recently said it wants to put one-third of the shares of its shipping subsidiary on the stock market.
P&O Nedlloyd moved back into the black in the third quarter of 2003, with a pre-tax profit of $41 million, its first positive result since the third quarter of 2001.
For the P&O group, present in the liner shipping market for decades, the sale represents a virtual exit from liner shipping. The move to reduce its exposure to container shipping “achieves P&O’s key strategic objective,” P&O said. Commenting on the sale, P&O said it remains committed to directing capital “to the strongest growth areas of its business where it has a competitive advantage,” and exiting from or reducing investment elsewhere.
The London-based group will incur a loss of '52 million ($95 million) on the sale of its 50-percent share in P&O Nedlloyd and an '8 million ($15 million) reduction in group net equity before transaction costs and other items. P&O said it intends to use the cash raised in the sale to reduce its debts.
The British group noted its “25-percent residual shareholding (in Royal P&O Nedlloyd} will enable P&O to participate in any further upside in the container shipping industry.” P&O said it will retain a 25-percent equity stake in Royal P&O Nedlloyd “for a minimum of six months following the transaction.”
In early trading today shortly after the buyout and rights issue announcements, the Royal Nedlloyd stock was down 6.6 percent, to 28.35 euros, while P&O’s stock fell 7 percent, to '2.25.