Chemical is only a small portion of Brostrom’ operation

With the proposed acquisition of Maersk over Brostrom being approved by the European Community competition authorities and no other approvals are required to complete the offer and therefore all conditions are consequently fulfilled, it paved the way for Maersk, a containership operator to get more involved in the product tanker operation.

Brostrom AB is a Sweden-based company engaged in the provision of marine transportation for the oil product tanker industry. It is listed in Stockholm, Swedia. Its logistics services include product tanker, very small portion of chemical tanker shipping and marine services. The Company's fleet consists of 90 mostly product tankers and only a handful of chemical tankers and are mostly operated under pooling arrangement. The Company has offices in Sweden, Norway, Denmark, France and Singapore. The Company will be acquired for $430million or SEK3.2 billion Swedish crowns. ($1=8.248 Swedish Crown)

The European Commission confirmed such deal even though the two companies’ operations overlap in the liquid bulk tanker sector after some critics comments that the combination of the two companies would create unhealthy competition structure within the sector and disrupt the level playing field as well as reducing competition within the sector thus exposing customers into a less competitive industry.

Following the announcement, Copenhagen-based Maersk announced its 57 crowns-per-share cash offer unconditional. Shareholders holding 55.9 percent of Gothenburg-based Brostrom’s stock have accepted the offer. The price per share of SEK57, was to be increased by an interest rate of 6% per annum, calculated from two months after the announcement of the offer, that is 27th October 2008, until the date when it was declared unconditional - 14th January 2009. Accordingly, the settlement price per share amounted to SEK57.73.

The combination of the two companies will create the world’s biggest oil product tanker company with a total fleet of 270 vessels. The combined company has about 60 ships under construction.

The difficulty of building new oil refineries in the main consuming countries and imbalances in the types of refining capacity between different countries also mean oil products now have to travel longer distances to reach consumers.

Maersk has announced the transaction in late August but has since canceled or postponed all new investment projects to free up cash.

"This is an acquisition that has been triggered by a very weak market," said Johannes Moller, analyst with Danske Markets. "These small product tankers are making almost no profit right now. With this transaction, Maersk will be consolidating this market."

Unlike chemical tankers which carry specialised chemical products, products tankers carry commoditised oil products and therefore is always in a more competitive industry. The volatility of product tanker segment will be even more for the larger players with larger product tankers.

Danish tanker company Torm (nasdaq: TRMD - news - people ) has also been on the hunt for acquisitions recently: it spent $125 million on a 50.0% stake in FR8 Group in January, and struck a similar deal to buy half of OMI in conjunction with Teekay (nyse: TK - news - people ) last year.