P&O to end Stena Lines partnership with £200m buyout

The shipping and ports group P&O is to axe a number of loss-making cross-Channel routes as part of a £200m investment in its ferries business that will see it buy out Stena Lines, its Swedish partner.

P&O said that as part of its plans to focus on its shorter, profitable services out of Dover, it wanted to end the last remaining Dover-Zeebrugge crossings by the end of the year. Axing the route, which is mainly used to transport freight, will affect about 100 shoreside staff, Peter Smith, the company's communications director said.

P&O is paying Stena £150m for its 40 per cent stake in P&O Stena Lines and will assume about £50m of the company's debts. The deal, which ends the partnership struck up in 1998 in response to competition from the Channel Tunnel, will strengthen P&O's position in the UK and Continental ferry market.

The move would see the group reduce its P&O Stena fleet to eight ferries from 10 and allow it to replace two of its older ferries on the Dover-Calais route with the Dover-Zeebrugge ferries.

The shipping group, which last month announced it would shed 1,000 jobs from its P&O Nedlloyd venture, has also begun talks about closing its crossings from Felixstowe to Zeebrugge and Rotterdam.

"Zeebrugge competes with Calais and people, particularly freight drivers, don't hesitate to go further distances if they can save some money," Mr Smith said. The Dover-Calais route takes one hour compared with the four-hour crossing to the Belgian port.

The cash purchase will be funded from P&O's existing credit facilities and, although subject to competition clearance from Brussels, is not expected to face any hurdles. Mr Smith added that the Stena name would disappear from the P&O ferries but said the new name was undecided.

Cost savings from the deal are expected to be visible from next year, although it would not significantly enhance earnings until 2004, Mr Smith said. "The Dover routes are the world's busiest ferry routes. By consolidating our presence there we think we have a sound base for further investment," he said.

While some analysts expressed surprise that P&O, which bills itself as a ports and logistics group, had chosen to expand its ferries division, Mr Smith said that ferries were very much core to the group. "We have absolutely no plans to sell the business," he said. No further route closures are planned.