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ThyssenKrupp-Abu Dhabi deal hits several snags

Says Abu Dhabi MAR won't buy Blohm + Voss; Looking for a new buyer; Also scraps Abu Dhabi MAR JV deal on naval surface ships; Says reason is political change in Middle East; Shares down 2 pct - Reuters

July 2, 2011 8:06 by

ThyssenKrupp has scrapped a deal for Abu Dhabi MAR to buy Blohm + Voss, leaving its plans to withdraw from civilian shipbuilding in disarray.

ThyssenKrupp, which is also Germany’s largest steelmaker, said on Friday it has also cancelled a separate deal with Abu Dhabi MAR to set up a joint venture to sell naval surface ships to the Middle East and North Africa, blaming changes in the political landscape.

ThyssenKrupp said cancelling the deals would not have any impact on its full-year financial results forecast and that it was already in talks with other parties interested in Blohm + Voss.

Hans-Joachim Otto, the German minister responsible for maritime industries, said the government was happy to serve as a facilitator for negotiations over the Hamburg-based assets, which would probably focus on foreign investors.

A German shipping analyst, who declined to be named, said he now expected a restructuring of ThyssenKrupp’s marine division to take longer than planned but did not see any negative financial impact.

“It’s just delayed … The final structure will only comprise the naval submarines and components business, which offer attractive margins anyway,” he said.

Shares in ThyssenKrupp were 2.2 percent lower at 35.06 euros at 1314 GMT, making the stock the worst performer on the German blue-chip DAX index.

ThyssenKrupp said another agreement for Abu Dhabi MAR to buy its Kiel-based container ships and yachtbuilder HDW Gaarden is going ahead.

ThyssenKrupp was keen to sell all its yards for fast passenger, ferry, cargo and container ships and bespoke yachts after new orders dried up in the recession and overcapacity has been exacerbated by competition from shipbuilders in China.

Among the superyachts Blohm + Voss is famous for building, the biggest by far was Russian businessman Roman Abramovich’s Eclipse, the 557-footer equipped with two heli-pads, a pool and a missile-detection system.

When the ADM deals were signed in October 2009 ThyssenKrupp promoted them as creating jobs in Hamburg and strengthening Germany’s shipbuilding industry, the biggest in Europe.

Meanwhile the joint venture with ADM was meant to sell frigates and corvettes to the Middle East and North Africa, with ThyssenKrupp retaining the lead role in all projects with the German navy and NATO partners.

But the main conditions for a commercially viable joint venture no longer exist, ThyssenKrupp director Olaf Berlien told reporters on Friday.

A popular revolt in Tunisia earlier this year spread to Egypt and unleashed a wave of pro-democracy protest movements that have convulsed governments in several countries including Libya, Syria and Yemen.

“I think the deal failed because they could not agree on financing issues, with the German army wanting the shipbuilders to put upfront a bank guarantee to ensure any production of naval ships, which take years, would really be completed,” one shipping analyst told Reuters.

Berlien said the German government had played no role in cancelling the deal, without being more specific.

A banking source said French military shipbuilder DCNS could be interested in the naval business. DCNS was not immediately available for comment.

ThyssenKrupp will retain the jewel in its naval shipbuilding assets, Howaldswerke Deutsche Werft (HDW) in Kiel, which makes submarines for Germany and its NATO partners.

The 165-year-old HDW shipyard is the birthplace of the modern submarine and the yard where Nazi Germany built the U-boats that terrorised Allied ships in World War Two. ($1=.7062 euros) (By Marilyn Gerlach and Tom Kaeckenhoff, Additional reporting by Arno Schuetze; Editing by Greg Mahlich)

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