Kvaerner merging with Aker to avoid bankruptcy

The Anglo-Norwegian engineering and construction group Kvaerner reluctantly agreed to merge with the oil services group Aker Maritime yesterday in a last-ditch plan to avert bankruptcy that hands Aker 50 per cent control.

The troubled group dropped its bitter opposition to any merger with its rival and said in a joint statement with Aker that the deal "will create a new and strong actor in the oil and gas business, with a considerable potential for international growth".

Shares in loss-making Kvaerner, which has 35,000 employees in 35 nations, rocketed 26 per cent on the Oslo bourse as the news erased the threat of imminent bankruptcy. Aker was already Kvaerner's main shareholder with a 25 per cent stake

Under the plan, Aker will merge with Kvaerner's oil and gas division in return for doubling its stake in the expanded Kvaerner to about 50 per cent.

Kvaerner, long a rival to Aker in building oil and gas platforms, accepted Aker's drive for a merger after Aker said it would veto a rival rescue plan agreed last month by Kvaerner's board and Russian oil firm Yukos, which owns 22 per cent of Kvaerner. Saddled with giant debts after an over-aggressive expansion in the 1990s that included the takeover of British conglomerate Trafalgar House, the group feared it might have to file for bankruptcy later this week. The merger still needs approval by creditor banks, shareholders, Norwegian authorities and the European Commission.

The two companies said they were in talks with creditors and hoped for approval from creditor banks within 24-48 hours. The deal will be put to shareholders next month.

Analysts said a tie-up of Kvaerner and Aker makes industrial sense because both need more clout to compete abroad. The two have competed for years in the Norwegian offshore oil and gas industry for giant contracts in building production platforms and facilities.