Neptune Orient Lines (NOL) today announced it had reached a conditional agreement to sell its crude oil transportation company American Eagle Tankers (AET) to Malaysia International Shipping Corporation Berhad (MISC).

NOL Chairman Cheng Wai Keung said, “This is a strategic move that will allow us to focus on our core container transportation and logistics businesses, APL and APL Logistics, while at the same time strengthening our balance sheet and unlocking value for shareholders.”

Under the terms of the agreement, MISC will pay a purchase price for equity of US$445 million in cash at closing for the acquisition of the lightering specialist company, which today operates 29 Aframax tankers and two Very Large Crude Carriers (VLCCs), principally in the Gulf of Mexico/Atlantic basin. MISC will also fund a US$75 million cash dividend from AET to NOL.

The purchase price is also subject to adjustment on a dollar-to-dollar basis for the profits earned from February 8, 2003 to the closing date. MISC has agreed as well to increase the equity price should AET achieve certain performance milestones over the next two years.

The decision to divest followed a thorough six-month review of the Group’s investment in AET. Mr Cheng said, “We have been through a robust and comprehensive assessment process, and we are confident that the sale of AET at this time, if approved, will provide an opportunity to realise a sizable gain on the Group’s investment in AET.

“It would also significantly strengthen the Group’s balance sheet and enable resources to be focused on driving sustained profitability from our core capabilities in global container transportation and logistics,” he said.

As a result of the strategic divestment, the NOL Group is expected to reduce its debt burden, with net gearing cut by approximately half.

Mr Cheng said AET CEO Joseph Kwok and his management team, together with the portion of NOL’s ship management subsidiary, NSSPL, that serves the tanker unit would move with the business to MISC and operate under the name Eagle Shipmanagement Pte Ltd. The remaining portion of NSSPL, which serves NOL’s container transportation unit, APL, would stay with NOL.

“Under Joseph’s capable leadership, AET has been a significant contributor to the Group over the years. But the time is now right for us to focus on what we do best and to allow AET to grow in its own right,” Mr Cheng said. “The transaction with MISC provides Joseph Kwok and his team with the opportunity to expand their business and their markets under the umbrella of a much larger fuel transportation specialist organisation.”

Mr Cheng said several parties had shown strong interest in AET prior to and during the review process, which meant the review looked particularly closely at that option. The current conditional agreement developed from that scrutiny.

The agreement is subject to shareholder approval, which will be sought at an Extraordinary General Meeting to be held on the same day as the Annual General Meeting, 28 May. Shareholders will receive information regarding the sale on or before mid-May.

Pursuant to shareholder and regulatory approval, the sale of AET is expected to be completed within three months.

JP Morgan acted as financial advisor to NOL during the transaction.

About NOL

NOL is a Singapore-based global transportation and logistics company engaged in shipping and related businesses. Its container transportation arm, APL Liner, provides customers around the world with container transportation services that combine high quality inter-modal operations with state-of-the-art information technology, while APL Logistics provides end-to-end supply chain management services through its global network. Its crude oil transportation company, American Eagle Tankers (AET) provides quality services to the oil industry, principally in the Caribbean and Gulf of Mexico region, currently operating 29 Aframax tankers, of which seven are chartered in, and two VLCCs.