Teekay to Buy Tanker Owner OMI for $2 Billion

By Matthew Leising
April 17 (Bloomberg)

Teekay Shipping Corp. and Denmark's D/S Torm A/S agreed to buy OMI Corp., the second-largest U.S. oil-tanker owner, for $1.98 billion to expand their fleets.

OMI shareholders will receive $29.25 in cash for each share, the companies said today in a statement. That's 5.4 percent above today's closing price for OMI. Teekay and Torm will split the cost of the acquisition, which is $2.2 billion including debt, the companies said.

Prices for new ships have skyrocketed because of shipyard backlogs, so OMI's fleet of Suezmax crude oil tankers and vessels that carry refined oil products is an attractive way for the buyers to expand. Prices for a new Suezmax jumped more than 75 percent since January 2003, while used ships rose more than 90 percent, according to Cantor Fitzgerald.

``Torm gets to build on its fat product fleet, and Teekay gets to bolster its Suezmax fleet,'' said Omar Nokta, an analyst with Dahlman Rose & Co., an investment bank in New York. ``This transaction makes sense.''

Nokta, who rates OMI shares ``buy,'' predicted in a note to clients last month that Torm was looking to acquire a stake in OMI. Hellerup, Denmark-based Torm sold a $700 million stake in a rival Danish commodities shipping line to fund a bid for the U.S. oil-tanker company, Nokta said in the March 28 note. Nokta calculated that OMI's ships were worth about $2 billion. OMI said in March that it was exploring a possible sale of the company.

Young Fleet

Teekay, the world's largest tanker owner, will acquire the nine Suezmax tankers OMI owns or operates and eight tankers that carry refined oil products such as gasoline. Suezmaxes can each carry 1 million barrels of crude. Torm, an oil- and commodities- shipping company, will buy OMI's remaining 26 oil-product tankers, the statement said.

Stamford, Connecticut-based OMI has one of the youngest fleets among publicly traded tanker companies, averaging 3.3 years at the end of 2006.

Competitors such as Overseas Shipholding Group, the largest U.S.-based tanker owner, had expressed interest in OMI. Overseas Shipholding Chief Executive Officer Morten Arntzen said in March that he would look at OMI.

The purchase will add to the 15 Suezmax tankers that are already owned or operated by Teekay, which is based in the Bahamas and has its main offices in Vancouver. Torm operates a fleet of 100 vessels, including tankers that carry refined fuels such as gasoil and jet fuel, and dry-bulk vessels that carry commodities such as coal and iron ore.

In a separate statement, Teekay said it may file regulatory documents in the second half of 2007 for an initial public offering of its conventional tanker business.

(Teekay will hold a conference call on the acquisition tomorrow at 11 a.m. New York time. To listen, access the company's Web site at http://www.teekay.com/ .)