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Thursday, July 18, 2024

Aker also flexes market muscle

Statoil isn’t the only major Norwegian company flexing its market muscle in a depressed oil and offshore industry. Norwegian tycoon Kjell Inge Røkke’s Aker concern has tapped its own strength to push through what rivals call a “forced marriage” between its Solstad Offshore firm and deeply troubled Rem Offshore, setting the stage for more industry consolidation.

Aker could wave its flags even higher this week from here at its new headquarters at Fornebu outside Oslo, after forcing through what may be the first of many mergers within the troubled offshore sector. PHOTO:
Aker could wave its flags even higher this week from here at its new headquarters at Fornebu outside Oslo, after forcing through what may be the first of many mergers within the troubled offshore sector. PHOTO:

Newspaper Dagens Næringsliv (DN) reported Friday how Aker has forced Rem to merge with Solstad in what’s being described as an “extremely hard power play.” Øyvind Eriksen, chief executive of Aker that in turn controls Solstad, believes more such deals are in the works.

“This is an important start in the consolidation of the offshore branch,” Eriksen stated. He claimed the opportunities and the need for ongoing consolidation in the sector remained large. “Aker wants to be a leader in this process,” Eriksen said.

Not everyone welcomes the ability of Aker, which itself has laid off hundreds of workers in recent months, to play hardball with ailing competitors. Just as Statoil is being criticized for its market dominance in other areas, Aker last week by being blasted for throwing its weight around too. Åge Remøy, the largest shareholder in Rem Offshore, accused Aker of ambushing his company by managing to effectively block a refinancing deal that Remøy sought. The drama ended with Rem agreeing to merge with Aker’s Solstad.

“We’re finished with the ambush now,” Remøy told DN after the merger with Solstad was announced on Thursday. “We didn’t like the way things were done. We had rigged the company in such a way that we would have survived the next three to five years. Things didn’t go the way we thought they would.”

Remøy, whose company runs supply vessels to offshore oil and gas installations and has seen business dive in line with oil prices, was trying to view the deal more positively. “I have always said that Solstad (in the same business) is a well-run shipowning company, too,” he told DN. “If we first have to enter into a forced marriage, it’s good it was Solstad we had to team up with.”

Laid-up vessels that once served the now beleaguered oil industry provide a sharp contrast to the expensive residential projects built in Stavanger during the boom years. Now a local politician for the Progress Party is telling unemployed foreign workers to go back home. PHOTO: Berglund
Lots of offshore supply vessels have been laid up since oil prices fell, like here in Stavanger. One of Rem Offshore’s vessels is berthed here at far right. PHOTO: Berglund

He said the most important thing was to preserve jobs in the area where Rem Offshore is based, Norway’s Northwest Coast around Fosnavåg that’s been hit particularly hard by the downturn in the oil business. He also believes the newly merged company will grow. Platform supply services will be run from Fosnavåg, while Solstad’s offices in Skudeneshavn will function as headquarters with responsibility for most of the combined fleet. Remøy will continue to own around 15 percent of the shares and 9 percent of the votes, but Aker and Røkke will have control.

That suits Eriksen fine. He noted that it was Rem’s officials who “quickly” took contact after their refinancing fell apart. “We wanted to understand Aker’s plans and evaluate whether we could reach a good solution,” confirmed Arild Myrvoll, CEO of Rem.

More mergers likely
They did and both Eriksen and other market players think more merger deals will be struck. While Remøy insists his firm could have survived alone, others may not. Norway has many small offshore and oil service companies that built up large fleets of specialized vessels during the oil boom, which has since gone bust. Many vessels are laid up, the companies are ailing and “where there’s capital, there’s power,” Remøy said.

Not only is Aker keen to force mergers, shipping and offshore giant John Fredriksen is also looking at consolidation opportunities and fellow London-based Norwegian industrialist Kristian Siem has been advocating industry consolidation for months. Siem was watching the Aker-Solstad-Rem drama from the sidelines, reported DN, and claims he’ll have a different approach.

“We won’t demand control,” Siem, who says he has raised USD 250 million to fund consolidation, told DN. “We are open for joint ventures where we would have control together.” He controls Subsea7 and also owns Siem Offshore.

“The entire industry must be flexible and open,” Siem told DN, adding that he advocates mergers designed in such a way that local owners maintain an opportunity to recover lost values and keep operations at their home base. Eriksen of Aker stresses the need for “bigger and stronger entities in the offshore branch. It’s good that Aker could lead this process, and its surely an advantage that we want to be a long-term industrial player in the sector.” Berglund



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