Two the world’s largest classification societies, Det Norske Veritas (DNV) and Germanischer Lloyd (GL), have signed an agreement to merge.
The new entity will be called DNV GL Group and headquartered at Høvik, Norway outside of Oslo.
Classification societies are non-governmental organizations that create and maintain technical standards for the construction and operation of ships. They review and validate the design of ships and inspect them during construction. They also perform periodic surveys to make sure they continue to be sound.
Over the decades they have expanded into other areas such as the oil and gas industry and certifying that companies have met management standards such as the ISO 9000 quality standards promulgated by the International Standards Organization.
In addition to being one of the world’s leading ship classification societies, the DNV GL Group will continue to serve the oil and gas, renewable energy and power sectors. The companies said they will also be one of the three largest organizations granting management system certification.
“The merger rests on a strong strategic rationale, and responds to challenges of increased globalization, rapid technological change and the need for sustainable development. Our customers will benefit from an increased service offering and global competence base as well as one of the densest networks,” said DNV’s Group Chief Executive Officer Henrik O. Madsen, who will be the CEO of the combined new company.
“The merger with DNV supports our long-term goal of being recognized as one of the most respected technical assurance and advisory companies in the world”, added GL Group CEO Erik van der Noordaa.
The combined companies will have 17,000 employees and a global network of offices.
The DNV Foundation will hold 63.5 percent, while GL’s owner Mayfair SE will hold 36.5 percent of the shares.
The new company will have combined revenue of about 2.5 billion euros ($3.3 billion).
“We see this as a good strategic match. The two companies have a common set of values and complementary strengths. Both have strong brands and solid market positions as well as a reputation for high quality and strong integrity. There were negotiations between DNV and GL both in 1999/2000 and in 2006 about closer cooperation. I am very pleased that timing now seems to be right,” said Leif-Arne Langøy, chairman of DNV’s board.
The maritime business unit will be based in Hamburg, Germany, while maintaining its commitment to the Norwegian maritime cluster. Oil & Gas will be headquartered at Høvik, while Energy will be centered in Arnhem, the Netherlands, and Business Assurance in Milan, Italy.
The transaction requires approval from competition authorities.
“I think it is an excellent development and from the point-of-view of a flag state like the Marshall Islands, we are very pleased,” said Clay Maitland, managing director of International Registries, which administers the ship registry for the Marshall Islands.
Maitland, who is also chairman of the North American Marine Environment Protection Association, said “it creates some real critical mass among the classification societies in terms of skill sets, which can only benefit safety of the sea and protection of the marine environment.”
Maitland thinks that because of the worldwide economic downturn “there is going to be a need for mergers of this kind.”
There are some 50 classification societies around the world, but just 13 that are members of the International Association of Classification Societies. In addition to DNV and GL, these include organizations such as the Houston-based American Bureau of Shipping, Nippon Kaiji Kyokai (Class NK) in Japan, Lloyds Register in the United Kingdom, Bureau Veritas in France, and RINA of Italy.
Maitland noted that classification societies need to have a global presence, particularly in Asia where more and more shipbuilding is being done. While some classification societies do a great deal of non-maritime work, he thinks there will likely be additional link-ups or mergers between classification societies. - Chris Dupin