An important landmark in the history of the European harbour towage business was reached just before Christmas with the announcement that, after lengthy negotiations lasting almost a year, Kotug International and Royal Boskalis Westminster have finally reached an agreement to merge their respective tug operations in the region.

A new and powerful force within the European harbour towage sector will thus be created, one that will be able to benefit from economies of scale and should be able to generate operational efficiencies. The combined European harbour towage activities of Kotug and the Boskalis subsidiary Smit will be transferred to a 50:50 joint venture called Kotug Smit Towage. This new company will encompass the existing operations of Kotug in Germany, the Netherlands and the UK, as well as the Smit operations in Belgium, the Netherlands and the UK. Operations of the two partners in other parts of the world will be excluded from the joint venture.

Kotug Smit Towage will be one of the market leaders in northern Europe, serving a total of 11 ports, in four countries, with a fleet of 65 tugs of various types and sizes. The new business will have a combined turnover of around €150 million a year, and operational synergies are expected to lead to appreciable cost savings.

The merger has been driven largely by market trends in the shipping business, particularly the container sector, where there has been significant rationalisation of late through the creation of larger consortia and joint service arrangements. There have also been significant mergers and acquisitions such as the proposed takeover of NOL by CMA CGM, and the amalgamation of China Shipping Container Line and Cosco.

Such trends, together with the introduction of larger mega container vessels of 18,000 teu and above, have effectively reduced the amount of business available for harbour towage suppliers in northern European container ports. Kotug chief executive Ard-Jan Kooren says he believes the combined operation will allow the two companies to better meet the changing requirements of shipping company clients, while providing even higher levels of efficiency and greater optimisation of port calls. He adds, “In this consolidating market we can offer competitive services against the highest operational and safety standards within the industry.”

For Boskalis the creation of the joint venture is a further important step in the implementation of its harbour towage business strategy that has been based largely around the creation of regional partnerships in different parts of the world. As Peter Berdowski, chief executive of Boskalis, points out, “We have already generated substantial value and experience with this type of partnership at Smit Lamnalco, Keppel Smit Towage and SAAM Smit Towage. By joining forces in northwestern Europe we will be able to provide even better and more efficient services to our clients.”

The deal would seem to be a good one for both companies and their shareholders, strengthening their competitiveness in difficult market conditions. Shipping line customers may also benefit from having a supplier with greater flexibility to meet their evolving requirements across a network of major European ports. However there is a downside, which is a reduction in the level of choice and competition, particularly at UK and Dutch ports. Not all lines will be enamoured at the prospect.

Source: Tug & Technology Business, 4 January 2016