Aker Kvaerner Group
adopt the Aker Kvaerner brand for the entire group.
Internal problems in Aker Kvaerner
Kvaerner shares rose 40% by lunchtime in Oslo. The result was a financially stronger Kvaerner,
and most investors thought that this was the end of many bad years for Kvaerner.
But the internal problems started from the first day. From the beginning Kvaerner was negative
to Aker. They didn’t really wanted to merge with Aker, they just did because there was no other
solution out of the crisis. Kvaerner wanted to have all the control and on the other side Mr.
Rokke wanted to have as much power as he could get. And with the Russian oil firm Yukos,
which owns just less than a quarter of Kvaerner, in the back Mr. Rokke became the new CEO of
the board.
In 2002 Aker Kvaerner still had a huge liquidity problem, so the company kept selling asset to
earn revenues. The debt was a bigger problem than anyone had thought, and in the end of 2002
came the message. Aker Kvaerner had again a liquidity cries.
All January have the board had meetings with the banks and investors. Yukos oil want a huge
downsizing of the company, but Mr. Rokke and the rest of the board want share capital
augmentation. The board has announced that it can be a problem to pay salary to the workers the
15th of February.
Aker Kvaerner is struggling every day to avoid bankruptcy.
What could Aker Kvaerner have done to avoid the liquidity crises?
During a period of 6 years Kvaerner went thru expanding strategy, cut of dividends, increase in
share outstanding, restructuring and downsizing, merge with Aker Maritime, internal problems
and the company had three differnt CEOs.
For the first I think that before a company thrie to erxpand its business, it should have full control over its existings
operations. With this I mean that Kvaerner should have got there already existing industries more
profitable, so when the wanted to expand they hadn’t needed to borrow so much, and the risks
had been much lower if the investments went wrong.
At least a company which has to cut the dividends and increase shares outstanding at the same
time should never borrow money to invest in new industries. Of course it’s possible to earn a lot
of money, but it’s a risk that a huge company like Kvaerner never should have take. When you
are a CEO for 35000 workers and many thousands shareholders you have a responsibility, and
then I don’t think it’s responsible to act like Kvaerner did.
Some companies don’t pay dividends, but these companies usually do other things to increase
the per share value, like for example share buybacks. What Kvaerner did when they cut
dividends and on the same time increased share outstanding, was to decrease the per share value
with double effect. And by getting so much debt they will in the future decrease their instrinct
value. All this is important for way Kvaerner had an enormously [next page]