Yard over troubled waters

How unexpected can the takeover of a company by another be in a period where mergers and acquisitions constitute the principal feature of a global economy? This is a rhetorical question, and regards the takeover of German shipyard HDW by the US private equity firm One Equity Partners and its connection to Greece’s Hellenic Shipyards, also known as the Skaramangas Shipyards. HDW acquired the Greek facility in January and is currently awaiting approval from Brussels for the takeover. The developments regarding HDW underlined the fact that Greek companies are behind the times when it comes to dealing with the demands of an increasingly competitive global economy. The privatization of Hellenic Shipyards has dragged on for the last two years, while the government has been negotiating with the German buyer for at least eight months, the six last months after the signing of a conditional agreement. During this period, the German engineering group Babcock Borsig, which holds a majority stake in HDW, stressed the ingenuity of its business strategy by holding talks with both sides, as part of a move to resolve its financial problems. Its difficulties were well-known in Germany but not in Greece. Babcock’s interest in Hellenic Shipyards centers more on the Greek company’s naval contracts with a total worth of 1.5 trillion drachmas (4.4 billion euros). In its negotiations with One Equity Partners, it offered as inducement HDW’s signed contracts for the construction of 19 submarines with a total value of 5.2 billion euros and other submarine contracts under negotiation worth 1.2 billion euros through 2005. The latter included the Greek navy’s agreements with Hellenic Shipyards. To ensure that negotiations with the US private equity group would be successful, the German company signed an agreement with the Greek government regarding Hellenic Shipyards, on condition that payment would be made only after the European Competition Committee approved the takeover. This pretext bought them the time necessary to complete talks with One Equity Partners, while simultaneously tying up the Greek government’s own negotiations. For its part, the Greek government never questioned why HDW wanted more time to acquire approval for the Hellenic Shipyards takeover, without having submitted the relevant documents to Brussels. Trapped in the logic of petty politics and trying to avert the political costs, the government succumbed to the blackmail perpetrated by Hellenic Shipyards’ workers’ cooperatives, which wanted the German company to win the bidding contest. This took place despite the fact that the privatization adviser had ruled that the binding bids tabled by both HDW and the Tavoularis Group were not assessable and lay outside the the conditions set out in the competition. From then on, the case proceeded in line with political considerations, leading to the signing of the contract on October 11 and under the shadow of the PASOK congress on October 11 to 14. While there has been no official statement, HDW’s takeover by One Equity Partners has created concerns of further delays amid government circles. The principal conditions of the agreement with the German shipyard foresee the re-evaluation of the takeover’s financial terms. In the meantime, it is no secret that for some time Hellenic Shipyards’ operating expenses have been covered by down payments made on upcoming projects. What is of concern is what will happen when the new shareholders of HDW examine Hellenic Shipyards’ financial figures. The longer the delay, the bigger the shipyards’ problems. Approval from the European Competition Committee concerning the US company’s takeover of HDW is also expected to take time, especially in view of the present trade friction caused by the US-government decision to slap 30-percent tariffs on steel imports. Sources said the EU, which has appealed to the World Trade Organization over the steel tariffs, will use the entire timeframe to rule on One Equity Partners’ acquisition as a means of retaliating against the USA. It should be noted One Equity Partners has said it would transfer a 15-percent stake in HDW to ThyssenKrupp Industries. In the meantime, Economy and Finance Minister Nikos Christodoulakis and Development Minister Akis Tsochadzopoulos are due to meet with HDW executives on Friday to discuss the issue.

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