Aboitiz sells transport unit

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Wednesday, December 1, 2010

MANILA–A private equity fund controlled by the Chinese government will become the Philippines’ largest ferry operator as a result of deals announced by two major shipping firms yesterday.

Shipping line Negros Navigation will buy a 93.2-percent stake in Aboitiz Transport System (ATS), operator of the country’s largest ferry service, for $105 million, the firms said in a statement.

The merger will make Negros Navigation the biggest ferry operator in the Philippines, with 31 vessels. At the same time, China-Asean Marine BV will take a controlling stake in Negros Navigation through an equity infusion, Aboitiz officials said.



China-Asean Marine is a wholly owned unit of the China-Asean Investment Cooperation Fund, a Dutch-based private equity fund launched by the China Export-Import Bank, the joint statement said.

The fund, announced by Chinese Prime Minister Wen Jiabao last year, targets infrastructure, energy and natural resource investment opportunities in the 10-member Association of Southeast Asian Nations (Asean).

The twin deals are expected to be completed in January next year, the statement said.
The size of China-Asean Marine’s equity infusion into Negros Navigation, a privately held Philippine firm, was not disclosed.


However, Erramon Aboitiz, chief executive of ATS’s listed parent firm, Aboitiz Equity Ventures (AEV), said China-Asean Investment Cooperation Fund would become Negros Navigation’s largest shareholder.

“We are very pleased to transfer the ownership of ATS to Nenaco and its principal shareholders, the Chinese-Asean Investment Cooperation Fund,” Aboitiz said in a separate statement.

Nenaco chief executive Sulficio Tagud said his company operated eight vessels in 13 ports, while ATS operated 18 vessels in 19 ports.

“With a strong balance sheet, the joint team is confident that the increased resources of the combined company will enable us to provide innovative services, enhanced frequency and improved customer care,” Tagud said.

AEV senior vice-president and chief financial officer Stephen Paradies said the sale was not an easy decision to make for the company, which has been in the shipping industry for more than 100 years.

“We feel that these companies share the same long-term vision we have for the company,” Paradies said in a video press conference yesterday.

Paradies said that they hope to close the transaction before Jan. 10. The new entity will be called ATS Corp. but will no longer be identified with the Aboitiz Group of Companies.

The company, however, clarified that the purchase does not include the joint venture between ATS and Jebsen Group of Norway, which are engaged in ship management, manning and crew management, and bulk transport.

Paradies also told reporters that proceeds of the purchase will be allocated to its three core businesses in power, banking and food. He said AEV’s banking business requires capital to fuel its growth as it plans for more growth in Luzon. The food business, on the other hand, is growing, with plans of new acquisitions and improved operations.

He said the company’s power investments will have new projects in the pipeline.

Proceeds after taxes and related costs will also be distributed among ATS shareholders through a special cash dividend equivalent to P0.15 per share to all ATS shareholders of record as of Dec.15 this year, to be paid on Jan. 12.


Paradies said that the shipping industry is in need of consolidation as the performance of the domestic shipping is “not encouraging.” He pointed out that the shipping industry is “not good” this year as the company recorded losses of over P300 million due to the heavy dry docking of some of its vessels in the first half of the year.

He also noted the small market share of the shipping industry in terms of passage with the emergence of low cost carriers.

Paradies said Nenaco-ATS has formed integration and implementation teams composed of executives from both companies to ensure smooth transition of plans and programs and continuity of operations. (AFP)

Published in the Sun.Star Cebu newspaper on December 02, 2010.


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