N O L FINALLY SELLS AET

By Urs M Dür

[The following is an updated version of what appeared in Freshly Minted May 1st 2003. The conclusions are similar, but new numbers were provided and added to shed even more light on this substantial deal. – ED]

Singapore listed Neptune Orient Lines (NOL) finally, after years of trying to divest itself of its profitable Atlantic basin tanker arm, sold American Eagle Tankers (AET) to Malaysia International Shipping Corp. (MISC) for a total of $1 ,02 billion in equity ($445m), dividend funding $75m) and assumption of debt ($500m according to sources at NOL). NOL, losing over $220m last year and levered 84% debt to book at the end of ’02 (far worse, needless to say, debt/NAV), needed to do something and by our estimation got a big premium for the AET assets even if one includes the goodwill and franchise value associated with AET, about 202% of NAV. We go over our estimates below.

JPMorgan, specifically Michael Borch, was financial advisor to NOL and Citibank to MISC. Both banks, while it appears at this stage that NOL got the better of the deal just as the Aframax market is going to get blasted with a 9% supply increase in a falling market, deserve a huge amount of credit for getting a deal, which many said was politically unfeasible especially as the Malaysian government, via Petronas, and the Singaporean authorities, Temasec, respectively controlling owners of MISC and NOL, are known political rivals not usually willing to cut each other some slack. Really, bravo to both banks.

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