Vopak May Split Into Two

Vopak, the world's leading oil, gas and chemical storage and distribution company, today said that it would split into two separately listed businesses, a move that is likely to open the way for consolidation in the sector. The group's shares rose last week as investors welcomed signs that it was poised to separate its tank storage business from its sluggishly performing chemical distribution arm. The move will draw a line under a brief and turbulent history set in motion by the 1999 merger of Van Ommeren and Packhoed, the two Dutch peers. While not unwinding that merger, given that both companies contributed tank storage operations, it will be taken as confirmation of recent comments by Vopak that the synergies expected from the alliance have largely failed to materialise. Vopak's shares have been under pressure for several months following a series of profit warnings, which led to the resignation of Ton Spoor, its chairman, in January. Gary Pruitt, an American who replaced Mr Spoor as chairman, has since made clear that although the business units possessed common features, “the expected synergies have proven to be limited”. Full-year net profit before amortisation and exceptionals had slipped to E132.1m ($117.8m) from E160.1m a year earlier. Vopak declined to comment ahead of a news conference scheduled for today, at which a strategic review conducted by its supervisory and management boards will be unveiled. But people familiar with the company say it will seek separate listings for its tank storage and chemical distribution units and redistribute E1.5bn in net debt between the two units. That may take three to six months, given that its relationships with banks will almost certainly have to be addressed, with loan terms likely to be redrawn. There is also likely be heated debate over where capital should be allocated. The storage of bulk chemicals, oil and gas contributes about two-thirds of earnings before interest tax depreciation and amortisation but cashflow from that division has been diverted into a distribution arm where margins have been squeezed by over-capacity in a chemical sector hit by the economic slump. The value of the tank storage unit was evident when the company received, but rejected, a bid reportedly worth E1.1bn last year. The separation may also trigger consolidation in the chemical distribution sector, where Vopak's leading position, cemented by last year's GBP310m ($448.4m) acquisition of Ellis & Everard of the UK, is based on a market share of just 7 per cent.

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