Marine Log

November 29, 2006

GL Boards say no to BV

The Executive Board and Supervisory Board of Germanischer Lloyd AG have advised their shareholders to reject the acquisition offer by Bureau Veritas, saying it would neither meet the needs of the Society and its 3,200 employees, nor be in the best interests of the shareholders themselves. Following is the text of a statement issued today:

After due examination and assessment of the purchase proposal, both bodies of the Society have issued a joint statement to the shareholders, detailing their reasons for rejecting the offer. The risks of the envisaged takeover by far outweigh any possible benefits. "We do not need Bureau Veritas. On the contrary: a hostile takeover would jeopardize the continuation of our business success thus far," said Executive Board Member Rainer Schoendube. The Supervisory Board too advises against accepting the offer.

On 9 November, the French certification and classification group had submitted a takeover offer to the shareholders, without any prior consultation with the Executive Board and Supervisory Board.

In the view of the Executive Board and Supervisory Board, a takeover by the French competitor would endanger the growth and value-adding potential of Germanischer Lloyd, which has grown faster than the overall market in recent years. The profitability of Germanischer Lloyd lies appreciably above that of Bureau Veritas.

At Germanischer Lloyd, the high volume of investment dedicated to research and development and to the initial and advanced training of the staff worldwide is a significant factor in strengthening GL's innovative capability and elevating the quality standard.

A takeover by Bureau Veritas would have a dampening effect on such investment. Owing to the planned external financing, there would be added pressure on maximizing profitability, which would then necessitate drastic cost-cutting programmes.

This in turn would threaten the leading position of Germanischer Lloyd in safeguarding quality in newbuilding classification and in the fleet in service. Executive Board Member Dr. Hermann J. Klein sees this as a key reason to reject the offer: "Our uncompromising philosophy of highest quality, safety and service has made Germanischer Lloyd the worldwide market leader. A hostile takeover would jeopardize the future of this successful business model."

The offer is constrained by numerous conditions. For example, Bureau Veritas demands an examination of the financial and legal circumstances of Germanischer Lloyd.

The purchase price is also subject to terms and reservations. Bureau Veritas also makes the price dependent on the results of a due diligence investigation. In addition, Bureau Veritas will, at its own discretion, be able to withdraw the offer at any time. However, the shareholders are only given a limited right of withdrawal.

Such a procedure would not be admissible according to the German Securities Acquisitions and Takeover Act for the acquisition of a corporation listed on the stock exchange. In accepting the offer, the shareholders of Germanischer Lloyd would be given no certainty as to whether and in what form the process would actually culminate in a takeover by Bureau Veritas.

Moreover, the offer of Bureau Veritas contains no binding assurances as regards the employees and business locations. The declarations of intent are formulated in very general and non-committal terms and, in part, are conditional on subsequent review. Statements on the consequences of a takeover for the number of staff members, the conditions of employment and employee representation are lacking entirely.

The workforce has already signalled its opposition. It is on their outstanding technical competence and their quality motivation that the success of Germanischer Lloyd depends. "I expect that, in the event of a takeover, many members of staff will look for a new employer," says Executive Board Member Rainer Schoendube. "Should it come to this, Germanischer Lloyd would lose valuable technical know-how, while longstanding customers would lose their trusted personal contact."

From the standpoint of the Executive Board and Supervisory Board, a hostile takeover also weakens the role of Germanischer Lloyd as an important partner of the shipowners, yards, supply industry, ship finance institutions and flag states. Germanischer Lloyd is an essential component in the German maritime cluster. As the world's fourth-largest shipbuilding location, the third-largest domicile for shipping companies, the second-largest customer in the shipbuilding industry, and the number one in container shipping, Germany is an important player in the international maritime bodies. Experts of Germanischer Lloyd are called upon to advise high-ranking officials in the Federal ministries in technical matters when they represent Germany's national interests.

In the estimation of the Executive Board, a takeover by Bureau Veritas would lead to the loss of many clients in the German maritime cluster.

The Executive Board and Supervisory Board are convinced that the successful expansion course pursued by Germanischer Lloyd up to now will also ensure its continued business success in the future.