In a major rationalisation of Britain's ferry industry, The Peninsular and Oriental Steam Navigation Co is to buy Royal Nedlloyd NV's 50 per cent interest in North Sea Ferries (NSF) for GBP25.25 million (about HK$304.4 million). The companies signed a memorandum of understanding this week. P & O chairman Lord Sterling said: 'Today's development achieves the twin aims of reducing costs by combining the NSF and Felixstowe operations and strengthening our position in the market.' NSF, which will become P & O's wholly owned subsidiary, will be merged with the P & O European Ferries operation at Felixstowe to form a new operating company, P & O North Sea Ferries. P & O expects at least GBP5 million savings a year on a total cost base for the NSF and Felixstowe operations of GBP140 million. The savings will be achieved by reducing the combined workforce of the new operation from 1,700 to about 1,600 by integrating the port functions in Europort and Zeebrugge and reducing administrative staff. There will be associated savings in shore-side costs. In the first half of 1996, NSF carried 8 per cent more passengers, 14 per cent more cars and 6 per cent more freight than last year. P & O and Nedlloyd have held discussions about the future of NSF since the end of 1995. A restructuring programme was set in place but the parties agreed that a more strategic answer was required if NSF's future potential was to be maximised. It is hoped that the job losses of about 100 in the port, operational and administrative areas will be achieved largely through voluntary redundancies. The losses will be split between North Sea Ferries and P & O European Ferries Felixstowe. Completion is expected before November, at which point it will be made retrospective to September 1.