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/ .)

Tanker Rates May Snap 7-Year 2nd-Qtr Drop

Tanker Rates May Snap 7-Year Second-Quarter Drop, Dahlman Says
By Grant Smith

March 14 (Bloomberg)

The cost of hiring crude-oil supertankers may rise in the second quarter for the first time in seven years as record U.S. temperatures allow refiners to finish maintenance work early and boost imports in readiness for the annual driving season, according to Dahlman Rose & Co. LLC.

Daily hire rates for the largest tankers in the next three months may be higher on average than the $50,000 a day estimated for the first quarter, said Dahlman Rose analyst Omar Nokta. Rates for the 2-million-barrel carriers are currently at $55,000 a day, he said.

The U.S. has had its warmest January since the National Weather Service began storing data 128 years ago, damping demand for heating oil and enabling refiners to cut imports after bringing forward maintenance programs. Refiners are poised to increase imports to replenish shrinking motor-fuel inventories.

``Rates are picking up steam now as refiners get ready for the driving season, so we could see the second quarter beating the first for the first time in this cycle,'' Nokta said in a telephone interview from New York March 12.

Dahlman Rose correctly forecast the direction of freight rates last year. It upgraded its outlook for the shares of tanker operators last June before a two-month rally in which freight rates rose 32 percent. The bank advised ``caution'' on Sept. 11. Rates declined 27 percent in the next 11 weeks.

Seven-Year Trend

Hire rates have fallen every second quarter since 2000 because refinery operators such as Exxon Mobil Corp. and Valero Energy Corp. take units offline when consumption of winter fuels dwindles, to reconfigure equipment for gasoline production. This year, refiners have chosen to overhaul machinery in the first quarter instead, to take advantage of the warmer-than-normal weather. The U.S. is the world's biggest energy user.

U.S. refinery utilization rates

fell in the week to Feb. 12 to 85.2 percent of capacity, their lowest in more than a year, Department of Energy data show. Gasoline supplies have declined 4.7 percent to 216.4 million barrels in the past four weeks.

Tanker demand will be buoyed because the Organization of Petroleum Exporting Countries, which pumps 40 percent of oil used worldwide, has finished a phase of production cuts begun in November aimed at trimming unwanted supply, Nokta said. The 12- member group has pledged to reduce supply by 1.7 million barrels a day since last October and will meet tomorrow in Vienna.

``OPEC is going to have to boost supplies, or at least not cut, as they've seen the last set of cuts starting to work and because the demand is there,'' said Nokta.

Increased hire rates will help stoke gains for the shares of Frontline and Overseas Shipholding Group, Nokta said. The companies are among the largest tanker operators, after Nassau, Bahamas-based Teekay Shipping Corp., the world's biggest.

``It looks like Frontline and Overseas Shipholding should see some support,'' he said.

Matches Bank of America

Last May, Dahlman Rose helped Athens-based Quintana Maritime Ltd. raise $191 million from a sale of shares to finance the purchase of 17 commodity carriers, the second- biggest acquisition by a dry-bulk shipping company.

Dahlman Rose's outlook matches that of Bank of America Corp. which cited an expected increase in OPEC shipments.

``We expect long-haul shipping rates to rise late March into the second quarter as OPEC increases production to re- supply the market,'' Bank of America analyst Philippe Lanier in New York said in a March 5 report.

Nokta, 27, has worked as an analyst for Dahlman Rose for three years and holds degrees from Texas A&M University and Fordham University.

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