Norwegians take over Estonian shipping company

The Baltic Times, TALLINN
By Kairi Kurm
Jun 21, 2001

An international shipping concern, the Tschudi and Eitzen Group, acquired majority ownership in Eesti Merelaevandus (ESCO), the largest privately-owned shipping company in Estonia and the Baltic states, on June 7.

The Tschudi and Eitzen Group purchased ESCO shares through the U.S. company Stanton Capital from Baltic Sea SA, which owned 80 percent of ESCO before the deal. The Tschudi and Eitzen Group, privately owned by Norwegian businessmen Axel C. Eitzen and Felix H. Tschudi, controlled 12 percent of Baltic Sea SA before the purchase.

According to ESCO’s managing director, Tom Stage Petersen, the company is planning to establish a foothold in St. Petersburg within the next six to eight months and is looking for new possible alliances with other industrial partners in the Baltic states.

“We’re going to focus on our core business, which is Eurolines,” said Petersen. “We’re also going to concentrate on international ship management services, because ESCO in cooperation with Tschudi and Eitzen has a higher (level of) competence in this field.”

According to Petersen, ESCO withdrew from the passenger ferry market at the end of last year and chartered its passenger ferries Baltica Kristina and Regina Baltica to Hansatee.

“ESCO controls over 50 percent of container movement in Estonia. Besides its direct competitors, it’s also competing with various gateways to Baltic ports,” said Petersen.

ESCO is a leading Ro-Ro and container operator in the Baltic region and Estonia’s largest ship owner with a fleet of 27 vessels, more than half of which were built in the 1990s. The company employs more than 800 people.

The company was established by the state in 1991 and wholly privatized in 1999 by American, Norwegian and Estonian investors. Since the start of its privatization process back in 1997, the company has sold half of its fleet and reduced its personnel by 50 percent.

According to the business daily Aripaev ESCO has in the last four years accumulated a huge debt, and its main shareholders are being suspected of siphoning capital out of the company. A source claimed that at least one of ESCO Holding’s subsidiaries, Baltic Sea SA, borrowed $13 million from the parent company, which in accordance with Estonian law is illegal.

“Our lawyers and auditors see to it that the company does not do anything that is illegal,” said Felix Tschudi. He told The Baltic Times that it was normal for a shipping company to have big debts as long as the value of its ships was higher than the debt level. He said that most of the ships sold dated back to the 1970s and were too old for ESCO, or they didn’t fit in the company’s strategy.

ESCO’s management didn’t wish to disclose its unaudited economic results, but according to Aripaev the company incurred a 100 million kroon ($ 5.5 million) loss on 1.2 billion kroons in turnover last year.

“ESCO experienced another difficult year in 2000 but managed to considerably improve its operational results. The outlook for 2001 is, however, much better due to the steadily improving Baltic and Russian economies,” said Petersen. He said that shipping is a cyclical business with periodic downturns and that the restructuring would help meet the changes on the market.

The Tschudi and Eitzen Group is an old Norwegian company operating in more than 10 countries. It owns and operates more than 100 vessels worldwide within the tank, bulk, container and ocean-going tug sectors. The company is also involved in third-party ship management and crewing services. The group employs close to 3,000 people worldwide.


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