Arab Partner

Hapag-Lloyd in Merger Talks

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Hapag-Lloyd could merge.
  • Why it matters

    Why it matters

    Merging with United Arab Shipping Company could help Hapag-Lloyd to increase its market share and reap economies of scale, tackling a market with oversupply.

  • Facts

    Facts

    • The container shipping industry has struggled the past few years as it faces an oversupply of shipping capacity, pushing freight rates down by roughly 40 percent since the start of 2013.
    • Hamburg-based Hapag-Lloyd is Germany’s largest shipping group.
    • It ranks fifth worldwide after Copenhagen-listed Maersk, Swiss-based Mediterranean Shipping Company, French company CMA CGM, and Chinese shipping combination COSCO/CSCL, according to Hapag-Lloyd data.
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    Audio

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Hapag-Lloyd, the world’s fifth-largest container shipping group, is in merger talks with United Arab Shipping Company, the German firm said on Thursday. Its shares shares jumped more than 10 percent in the course of the day.

The container shipping industry has struggled the past few years as it faces an oversupply of shipping capacity, which has pushed freight rates down by roughly 40 percent since the start of 2013.

“Hapag-Lloyd AG (HL) and United Arab Shipping Company SAG (UASC) are currently discussing forms of cooperation including a potential combination of their mutual container shipping operations,” the German company said in a statement.

German business weekly Manager Magazin had earlier reported Thursday that the two companies were close to agreeing a deal, which would make them the fourth-largest shipping group worldwide, after market leader Maersk, listed in Copenhagen, Denmark; Swiss-based Mediterranean Shipping Company; French company CMA CGM; and Chinese shipping combination COSCO/CSCL.

Hapag-Lloyd’s shares traded up 10.7 percent at €18.10 by 2.20 pm in Frankfurt, the highest level in three months and giving it a market capitalization of €2.2 billion, or $2.5 billion. Dubai-based UASC is largely owned by Arabic state funds, Manager Magazin said.

“In case of a business combination, the parties are basing their discussions on a relative valuation of the two businesses at 72 percent (HL) and 28 percent (UASC), subject to a mutually satisfactory completion of the negotiations and the mutual due diligence exercise,” Hapag-Lloyd said.

There was no certainty a cooperation or merger deal would be concluded, it added.

Both companies hope that the merger, which would make them the fourth-largest provider of container shipping, will strengthen their market position and help them cope better with the crisis in the industry, Manager Magazin reported.

Hapag-Lloyd, Germany’s largest shipping group, warned last month of a “tough market,” citing a drop in freight rates. In an IPO in November, its shares were listed on the Frankfurt exchange at €20 a piece and the company raised $300 million, less than the $500 million originally planned.

Hapag-Lloyd took over Chilean shipping company CSAV at the end of 2014, and said last month it was looking at more options to cooperate with partners.

 

Gilbert Kreijger is an editor with Handelsblatt Global Edition in Berlin, covering companies and markets. To contact the author:  kreijger@handelsblatt.com

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