Steven Roman in Tallinin -

Estonia bids for the title of Hong Kong of the north.

A decade ago, the prospect would have been unthinkable - a competitor from the former Soviet Union bidding to buy Silja Line, one of the two largest passenger and cargo ferry companies plying the waters between Finland and Sweden. Both Silja and its rival Viking Line have been around since the late 1950s, growing fat on the Scandinavians' need for transportation as well as their love of weekend mini-cruises. The Estonian ferry company Tallink, by contrast, sprouted from a Soviet-era joint venture and was barely a blip on the sonar before the mid-1990s. But times have changed.

Now Tallink - or more properly Tallink Group, the holding company that, along with its subsidiaries, owns and operates 12 large ferries on Baltic Sea routes - has grown to the point where it's competing with Viking Line and other regional players to snap up the financially troubled Silja Line. Tallink already controls 43% of the busy Helsinki- Tallinn passenger ferry market and operates the only regular ferry connection between Tallinn and Stockholm. The acquisition, if it goes Tallink's way, would give it access to the highly lucrative Helsinki-Stockholm route, which carries 9 million passengers annually.

Results of the sale will be announced in April, but no matter the outcome, the amazing growth spurt that Tallink has put on over the past 10 years is unlikely to slow.

RATE OF KNOTS

In fact, rapid growth seems to be the company's new religion, one that its chief executive, Enn Pant, has adopted wholeheartedly.

“Tallink's strategy is to become the leading shipping company in the northern Baltic Sea,” he told bne.

The way things are going, it might just get there. Last year, the company saw its net profits grow by a whopping 51%, and further development this year could push future earnings even higher. This spring Tallink launched a ferry service from Stockholm to Riga (currently the only one), and a few months from now the company will cut the ribbon on its new €20 million spa hotel in Tallinn's port area. It will be the group's second hotel venture - the 350-room Best Western Hotel Tallink opened in downtown Tallinn in 2004.

The most headline-grabbing moves, though, come from the expansion of Tallink's fleet. In May, its new 2,500-passenger cruise vessel, Galaxy, is scheduled to begin operating on the Tallinn-Helsinki line, with three similar ice-class ships coming on line in the next two years at a total cost of €553 million.

Tallink also recently purchased three SuperFast ferries from the Greek Attica Group for another €310 million.

Since joining the company as part of a management change (and then buyout) in 1996, Pant and his team made fleet renewal - the practice of constantly buying new ships and updating their older ones - a key part of the company's business plan. It's something to which they credit much of their success in this highly competitive market. “We're offering bigger vessels, nicer vessels, more comfort on board, and the services that people want,”

explained Peter Roose, Tallink Group's sales and marketing director.

Considering that nearly half of the company's revenue comes from onboard sales - meaning money that is spent in the ship's shops, restaurants, bars and casinos - providing the best services and latest comforts is no trifle. “How we define our business is we're really a leisure and entertainment travel company.

The big vessels are like big floating hotels,” said Roose. “It's a little bit more than getting on an airplane and going from point A to point B.”

FLOATATION

The company's rapid rise certainly hasn't been lost on investors. When Tallink launched an IPO last November, over 1% of Estonians bought in, raising a total of €166 million. “The offer was an extreme success with retail investors in Estonia,” said Tiiu Pedaja, director of corporate finance for Suprema Securities, an investment bank that was co-lead underwriter for the IPO. “The number of retail subscribers was 16,000, which is a huge amount when you compare the small population of 1.3 million.”It hasn't all been plain sailing, though. Tallink was forced to suspend the Tallinn-St Petersburg- Helsinki service it started in 2004 after only eight months of operation when potential passengers found it too difficult to get visas.

The company has also been dogged by press speculation that Ain Hanschmidt, CEO of Tallink's largest shareholder AS Infortar, arranged favourable loans for Tallink in his previous post as CEO of Eesti Ühispank in exchange for being offered a huge stake in Infortar at a fraction of its value. A recent internal bank investigation turned up no wrongdoing. Analysts say these are mere hiccups, and some investment bankers say that their real concern is what will happen to the company's edge when Estonian wages eventually rise to the level of those paid by its Scandinavian competitors.

EVER INCREASING CIRCLES

Part-owner Infortar, which has taken on the role of Tallink's real-estate development arm, doesn't seem unduly worried.

The company has launched a massive project called Tallink City, a multi-million-euro leisure and recreation centre in Tallinn's Lasnamäe district. Tentatively scheduled to open in 2010, it will encompass an indoor ski slope, a water park, hotels, shops and restaurants, and will of course provide further incentive to take Tallink ships.

Whatever the risks, the company is still expanding and its reach in the region is growing wider. One of the newly purchased SuperFast ferries, for example, will be used to add an Estonia-Germany route to Tallink's map. Roose downplayed ideas for expansion further afield.

“Our whole market is only our neighbouring countries at the moment - that's where we're developing and that's where our growth strategies are focused,” he said.

Naturally, however, when talking about the long-term prospects of a fast-moving company, nothing is off the table. “The Baltic Sea is a very big place… there's all sorts of possibilities for the future,” he said.