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/ .)

Black-Sea Tanker Rates Fall to Lowest in More Than 3 Years

Black-Sea Tanker Rates Fall to Lowest in More Than Three Years
By Grant Smith
March 8 (Bloomberg)

The cost of hiring oil tankers to ship 1 million-barrel cargoes of crude from the Black Sea to European ports fell to its lowest in more than three years because too many ships are available.

The fleet of so-called suezmax-class ships expanded 7 percent last year, according to London-based Drewry Shipping Consultants Ltd. Availability widened this month as increasing daylight hours speeded the passage of ships on the route from Russia to the Mediterranean.

``There are lots of vessels available,'' said Luis Mateus, an analyst with shipbrokers Riverlake RLS in Geneva. ``I don't see rates going up in the next few days.''

Freight rates from Black Sea terminals to ports in the Mediterranean were assessed at 91.3 Worldscale points yesterday by London's Baltic Exchange after declining for 11 consecutive days. That's the lowest since Sept. 10, 2003.

Delays through Turkey's 17-mile Bosporus Straits, which can reach about three weeks for a round-trip during the winter, have shortened to eight days. The waterway is the only sea route between Russia, the world's second-biggest oil exporter, and the Mediterranean.

Worldscale points are a percentage of a nominal rate, or flat rate, for a specific route. Flat rates, quoted in U.S. dollars a ton, are revised annually by the Worldscale Association in London to reflect changing fuel costs, port tariffs and exchange rates.

Oil shipments from Russia's main ports are due to fall 1.3 percent this month to 2.95 million barrels a day, according to schedules obtained by Bloomberg.

Based on a rate of 99.7 Worldscale points, operators of double-hull suezmax vessels can earn about $30,489 a day on the 12-day round trip between Novorossiisk, Russia, and the Italian port of Augusta, Sicily, according to a formula by R.S. Platou, an Oslo-based shipbroker, and Bloomberg bunker prices.

Frontline Ltd., the world's biggest tanker company by capacity, said Feb. 27 that it needs to make $22,600 a day on each of its suezmaxes to break even.

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