The new investor, Estonian shipyard Balti Laevaremonditehase, purchased the Norwegian-owned Western Invest, holder of the majority stake in the company which had failed to steer it to profit. The Estonians agreed to take over its liabilities and to pay the original asking price for a remaining 24.84 percent stake.
"The merger will enable us to withstand fierce competition from shipyards in other countries," said Balti Laevaremonditehase Chairman Fjodor Berman, after signing the deal.
The Tallinn-based shipyard agreed to pay 24.79 million litas ($6.19 million) to the Lithuanian State Property Fund, despite the $8 million losses VLR had incurred in the last two years. It will invest another $20 million in the company over the next five years. The deal has been approved by the company's trade unions, which have 1,200 members.
Western Invest was chosen in 1998 by the Lithuanian government as the most favorable of several bidders from Lithuania, Ukraine, Estonia and Latvia. The plan then was to sell a 92 percent stake. But having bought just 67.9 percent of the shares, Western Invest immediately mortgaged 65 percent of its stake to Latvia's Parex bank for $6.27 million, a loan which was not paid off.
Vladislavs Skredelis, a member of Parex's board commented: "The weakest point in the project was that the Norwegians were only financial investors. The shipyard's managers weren't sufficiently skilled to make the operation profitable, and the new buyers didn't know what investments to make."
Parex as the holder of the majority stake then led the search for another investor. "We made a thorough analysis of possible bidders. The Estonians are unmatched, even by Riga Shipyard," said Skredelis.
Riga Shipyard had came close to winning the stake but withdrew in mid-August after seeing VLR's balance sheets.
VLR is the second largest ship repair yard in the Baltic states. The Estonians now have a clear advantage in the region's ship repair market.
In the first 6 months of 2001, the Tallinn-based shipyard made $4 million in profits with a turnover of $33.37 million, while Riga Shipyard earned only $252,000 with a turnover of $10.28 million. VLR posted a profit of $1 million for the first seven months of this year and a turnover of $18 million. The result is similar to that of the same period in 1998, the company's most successful year so far, said Renaldas Vysniauskas, the company's chief financial officer.
Antanas Malikenas, director for privatization at the State Property Fund, told The Baltic Times, that lack of profitable contracts and inexperienced management were the main reasons behind the previous losses. Only after the State Property Fund insisted on changes to senior management this spring did the company return to profit. "The Tallinn and Klaipeda shipyards together will make a strong tandem in the Baltics," he said. "They will be able to meet the requirements of any client. The Klaipeda ship repair company has bigger docks so it can repair larger ships while the Estonians can take the smaller ones. They are natural partners."
Vakaru Laivu Remontas is the biggest enterprise in Klaipeda. Currently it has 1,520 employees. Despite a 12 percent national unemployment rate the enterprise is short of some 120 to 300 qualified persons, mainly welders, ship body workers and engineers. The average monthly salary in the company is 1,360 litas before taxes, 35 percent higher than last year's national average of 1,008 litas.
On Aug. 24, 2001, a newly built Nord Fjord car ferry was launched from Klaipeda. Measuring 72.2 meters in length and 14.6 meters wide, it will be able to carry up to 60 cars and 6 trailers. It was ordered by the Fiskerstrand company of Norway. It is the second ship built for the Norwegian customer and will be followed by two more.