Merger of Vela’s Fleet and Operations with Bahri
will explore more viable opportunities to expand cooperation between them in the area of marine activities. The conclusion of the merger will reduce the impact of Bahri’s exposure to the fluctuations in crude oil freight rates and will enhance returns for its shareholders. The merger creates a new national champion in the global shipping industry, creating jobs and facilitating new business opportunities, certifying Bahri’s position as fourth largest company in the world in terms of VLCC fleet, equipping them with the assets to meet the demands of Saudi Aramco and other clients. The merger of employees, resources and fleets under one umbrella will boost the Company’s capability to face the increasing demands of global clients around the world both now and in future. It also provides enormous growth opportunity contributing to greater returns for Bahri’s shareholders. Bahri seeks to obtain some regulatory approvals before the submission of the merger transaction in its final form to its shareholders for final approval. All approval procedures are expected to be completed by 2014 upon which the first VLCC will be delivered and the preliminary stage of integrating commercial and technical teams will be finalized. Throughout 2013, both companies sought to resolve all issues concerning the merger, paving the way for the seamless transfer of employees, VLCCs and the operation of the shipping contracts.
Pursuant to this agreement, Bahri will become the exclusive provider of VLCC crude oil shipping services to Saudi Aramco for the delivery of crude oil sold by Saudi Aramco on a delivered basis in accordance with a long-term shipping contract protecting Bahri in the event freight rates drop below the agreed minimum rate. In the event freight rates increase beyond the agreed threshold (compensation limit), Bahri will compensate Saudi Aramco for the amounts it has paid when the freight rates drop below minimum rate. Having concluded the merger, Bahri shall meet Saudi Aramco’s projected future needs estimated at nearly 50 VLCCs through the optimal operation of its fleet including 31 VLCCs and the charter of additional VLCCs as required. Further, Bahri and Vela have agreed to discuss interim arrangements to operate the VLCCs owned by Bahri within Saudi Aramco’s schedule to transport crude oil. These arrangements came to effect as of Safar 19, 1434, corresponding to January 1, 2013 until the long-term shipping contract becomes effective pursuant to the terms of the transaction agreements. Pursuant to the provisions of the merger agreements, Saudi Aramco will own 78,750,000 new shares in Bahri, representing 20% of Bahri’s total shares, and will be fairly represented in Bahri’s Board of Directors. Saudi Aramco will continue to directly manage all crude oil marketing and customer sales, while Bahri will provide reliable transportation services. Both parties
On November 4, 2012, Bahri signed the final binding agreements with Saudi Aramco and Vela, a wholly owned subsidiary of Saudi Aramco, to merge the fleet and operations of Vela with Bahri. In pursuant to the agreements Bahri will pay to Vela approximately SAR 4.9 billion to include SAR 3.12 billion in cash and the issuance of 78.75 million in new shares of Bahri. The merger is approved by the Board of Directors of Bahri, Saudi Aramco, and Vela. This merger is considered as a transformational step in the history of Saudi Arabia’s shipping industry and enables Bahri to become a strong company in the global maritime industry. This merger will result in a large combined fleet of 72 vessels and VLCCs in several domains so that Bahri becomes the world’s fourth largest company in terms of VLCC tonnage. Moreover, this merger will provide significant competitiveness in the global markets, and will contribute to an increased operational efficiency and lower overhead cost. This merger includes the transfer of Vela’s fleet containing 14 double- hull VLCCs, one floating storage carrier and five product tankers. All of Vela’s vessels crew and a number of official employees, and part of its working systems will be integrated with Bahri corporate structure.
Major Achievements in 2013
• Due to the outstanding services offered by the Company to the Ministry of Defense (MOD), His Excellency the Minister of Defense approved the renewal of the contract concluded with Bahri, prior to its expiry, for additional five years ending 2019 in consideration of a total of SAR 383 million. According to this contract, Bahri will continue to serve as the exclusive carrier of the Divisions of the Armed Forces at the Ministry of Defense and provide different types of shipping services abroad through sea, land and air during the term of this contract.
• NCC has amicably agreed with Norwegian Odfjell to dissolve their 18-ship pool. Pursuant to this agreement, NCC became the sole owner of NOCT, which was registered under the name “National Chemical Carriers JLT” following the dissolution in order that NCC independently runs its commercial operations.
• Introduction of a new business unit “Gas & Offshore Business Unit” in order to explore the offshore support services industry, which is a promising business in the Middle East. • Bahri and Saudi Aramco have signed a Memorandum of Understanding (MOU) with Sembcorp Marine Ltd., one of the leading international companies in marine and engineering services based in Singapore, to conduct a feasibility study for building a marine shipyard in the Kingdom of Saudi Arabia.
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