KEPPEL IN REVERSE TAKEOVER WITH HITACHI

KEPPEL IN REVERSE TAKEOVER WITH HITACHI

Singapore's shipbuilding and repair sector, buffeted in recent years by competition and declining work, is shrinking.

In what amounts to a reverse takeover, Keppel Corp. Ltd. said Friday it will merge its shipbuilding and repair operations with smaller rival Hitachi Zosen Singapore Ltd.Keppel, a maritime-based but widely diversified conglomerate, said it will sell to Hitachi Zosen all the shares of Keppel Shipyard Ltd. for about 265 million Singapore dollars ($165.62 million). Hitachi Zosen would then issue new shares to Keppel as payment.

''It is effectively a reverse takeover, as Hitachi is buying Keppel Shipyard by issuing new shares and Keppel then having a majority stake in Hitachi,'' said one Singapore stock analyst.

Hitachi Zosen is owned byHitachi Zosen (Asia) Holdings Pte. Ltd., Singapore unit of Japanese shipbuilder Hitachi Zosen Corp.

The unit in Singapore and Keppel now hold 71.4 percent and 0.7 percent, respectively, in the Hitachi yard. The proposed merger would see Hitachi Zosen's share up to 31 percent and Keppel's at 56 percent of the enlarged share capital.

Keppel would then be required to make an unconditional offer for the remaining Hitachi Zosen shares to comply with the Code on Takeovers and Mergers and Companies Act.

Assuming it goes through, the enlarged Hitachi Zosen will operate 1.3 million deadweight tons of docking capacity, or 44 percent of total capacity of the main yards in Singapore.

''The combined resources will give us greater flexibility and better efficiency in our operations. We will benefit from a wider marketing network and this will further enhance our market presence,'' said Loh Wing Siew, managing director of Keppel.

Takeshi Tenjin, executive chairman of Hitachi Zosen, said each yard would be able to bring expertise and strength to the other to offer more competitive services to customers.

''Among the big players, competition will be among two rather than four,'' the stock analyst said. There used to be even more.

Sembawang Corp., which operated a leading shipyard, last year took over ship repairer Jurong Shipyard Ltd. The latter also had a Japanese partner, Ishikawajima-Harima Heavy Industries Co.

The Sembawang-Jurong merger created one of the world's largest groups involved in ship repair and conversion. It covers three operations - Sembawang Shipyard Ltd., Bohai Sembawang Shipyard in China's Port of Tianjin, which is 50 percent owned by Sembawang, and PT Karimun Sembawang Shipyard in Indonesia, 65 percent owned by Sembawang.

The Singapore government has a stake in both Keppel Corp. (38 percent) and Sembawang Holdings Pte. Ltd. (48 percent), parents of the operating units.

The Singapore repair sector dwindled as costs rose, with operators losing business to Mideast yards where charges are lower. Much of Keppel's work has been done in the Philippines for several years after it bought three yards in search of capacity and savings.

Keppel Shipyard operates several repair docks at home, with aggregate capacity of about 1 million dwt.

Hitachi Zosen Ocean Development Co. (Pte.) Ltd. was founded in 1970, to take advantage of significantly lower costs than in Japan and rapidly developing expertise.

The firm, originally a joint venture between Hitachi Zosen Corp. and Robin Shipyard (Pte.) Ltd., made a name in shipbuilding and repair, steel structure fabrication, marine equipment supply, tugboat charters, ocean towage and marine consultancy.

The No. 1 dry dock, with capacity of 300,000 dwt., was commissioned in 1972 and a second, with capacity of 170,000 dwt., five years later. The slipway was extended last year, to 755 feet from 416 to allow shipbuilding up to 30,000 dwt.

In 1986, the company became a full subsidiary of Hitachi Zosen Corp. and changed its name to Hitachi Zosen Singapore (Pte.) Ltd. Six years later, it listed on the Stock Exchange of Singapore as Hitachi Zosen Singapore Ltd.