STX France, Fincantieri sole bidder / FOCUS

Genova - It would seem that Fincantieri is the sole bidder for the 66.6% stake in STX France, the shipbuilding subsidiary of Korea’s STX Offshore & Shipbuilding group which has been under receivership since the end of May, after amassing $5.8 billion in debts. The French shipyard, located in Saint-Nazaire, (which the Korean company acquired, in 2008, from Norwegian shipbuilding group Aker Yards, which also owned the Turku shipyard in Finland which it sold in 2014), represents the jewel in the crown of STX, with a market value estimated by Asian funds to range between $80-100 million and $220 million, providing 2,600 jobs plus a further 5,000 jobs in related industries, and with over ten ships on its order book, plus options on four additional ships, for a total value of $12 billion.

Yesterday was the last day to submit bids to the Seoul court handling the sale of the Saint Nazaire shipyard, while the sale of the remainder of the group’s businesses will take place in mid-2017. Judge Choi Ung-Young, acting as spokesperson for the court overseeing the process, announced that there was only one bidder, which would be Fincantieri, according to information reported by Reuters.

It would seem, then, that out of three parties initially interested in the sale, only Fincantieri, in which the Italian government has a majority stake - and has not commented on the process - remains, while, presumably, Dutch shipbuilder Damen (probably in partnership with Saint-Nazaire’s key customers, MSC Cruises and Royal Caribbean - with shares of between 5% and 16%), and Hong Kong’s Genting shipyard, have decided not to join the bid. A verdict by the court on the adequacy of the bid is expected next week: if Fincantieri’s offer should be considered unsatisfactory, the judges could re-open the sale. For Fincantieri, according to a source familiar with the matter, acquiring STX France would remove a longstanding competitor, and provide the company with a facility capable of building mega-cruise ships; at present only their shipyard located in Monfalcone, with a basin 550 metres shorter than that of Saint-Nazaire, can partially meet the demand from shipowners for increasingly gigantic ships. In particular, a possible deal would result in a European oligopoly, as, along with Germany’s Meyer Werft group, Fincantieri would control almost all cruise shipbuilding, which - awaiting for a restart in the oil industry - is the only profitable segment of shipbuilding currently.

Genting’s aim in buying Saint-Nazaire would have pursued the same objectives STX had nine years ago, which is the transfer of know-how to the Far East - albeit starting from firmer footing - while the Damen Group, which lacks cruise shipbuilding experience, however, would have had MSC and RCCL’s support. The latter arrangement was the most palatable for the French government, which, however, already in early November announced that whoever won the bidding process for the Saint-Nazaire shipyard, would have to negotiate a partnership with state-owned French naval contractor DCNS.

The French state’s goal is to ensure that, whatever the outcome, it retains a strong influence in matters pertaining to the STX France shipyard, in which it holds a 34.4% minority stake. The idea of having an Italian partner at the helm of such a strategically sensitive industry for France, received tepid reception in the country, but a Fincantieri-DCNS partnership would actually embody a model repeatedly invoked at the EU-level, a so-called “Airbus of the seas”, a company sufficiently large to safeguard European technological know-how in both military and civilian naval architecture.

DCNS and Fincantieri have already collaborated in the past, and perhaps for STX France’s sake it is preferable for experts of the trade to join the firm, rather than customers-turned-owners led by a partner with no cruise shipbuilding knowledge, or partners that may know the trade well but seek to export know-how. Both rival firms are not counting on a rejection by the court, but Fincantieri will be forced, in the next round, to show all their cards.