Merger saves Kvaerner

November 28, 2001 Posted: 1130 GMT

LONDON (CNN) -- Kvaerner, the troubled Anglo-Norwegian construction and engineering company, has agreed a merger and bailout with its main shareholder, oil and gas services Aker Maritime.

Aker, which currently owns 25 percent, will double its holding in the rescue deal worth 7.5 billion Norwegian crowns ($834 million), including 800 million crowns in debts.

Kvaerner, the 148-year-old company, which has about 35,000 employees in 35 countries, had said it could face bankruptcy this week unless it agreed a bailout with Aker.

The two companies held marathon talks over the weekend. Aker pushed for a plan that would give it 60 percent control of the merged company, but Kvaerner rejected that offer on Sunday.

Kvaerner, whose market capitalisation has plunged to about 1.3 billion crowns, ran up huge debts after an over-optimistic expansion in the 1990s, including the acquisition of British conglomerate Trafalgar House. It also diversified into businesses including cruise lines and a scheme for launching space rockets from a converted oil platform in the Pacific Ocean.

A statement issued by both companies said the deal would include a  Kvaerner share issue of at least 2 billion crowns at 4 crowns to 8 crowns per share.  Aker would take up to 500 million crowns and a second issue of 1 billion crowns would be open to exiting shareholders.

It added talks with creditor banks on new terms and conditions were still under way but that a deal was expected within 24 to 48 hours.

Russian oil firm YUKOS, Kvaerner's second-largest shareholder with 22 percent, said in a statement it supported the agreement.

YUKOS had had its own bailout plan worked out with Kvaevrner's board last month, which did not include a merger with Aker. The plan foresaw a share issue of 3 billion crowns, a billion more than proposed by Aker.

Kvaerner and Aker have asked the Oslo Stock Exchange to suspend trading of its shares until a more detailed proposal has been presented, which is set for 1100 GMT at the Aker offices in Oslo.

The two have competed for years in the Norwegian offshore oil and gas industry for giant contracts in building production platforms and facilities.