Maersk will pay $4b for Hamburg Süd

The boards of both Maersk Line and the Oetker Group, which owns Hamburg Süd, approved the sale and purchase agreement today.

   The world’s largest ocean carrier, Maersk Line, said Friday it will pay 3.7 billion euros (U.S. $4 billion) for Hamburg Süd.
   Maersk first announced its plan to buy the German ocean carrier on Dec. 1, 2016 without revealing the acquisition price, and signed a sale and purchase
agreement with the conglomerate that owns Hamburg Süd, the Oetker Group, on March 14.
   The sale and purchase agreement was just approved today by the boards of both Maersk and the Oetker Group.
   The acquisition still remains subject to regulatory
approvals, but Maersk said that process is on schedule with the U.S. Department of Justice approving the acquisition on March 23 and the European Commission granting conditional approval April 10.
   The EU did require Hamburg Süd to withdraw from five consortia on trade routes connecting North Europe to Central America and the Caribbean; North Europe and the West Coast of South America; North Europe and the Middle East; the Mediterranean and the West Coast South of America; and the Mediterranean and the East Coast of South America. The EU said “on these routes, the merged entity would have faced insufficient competition after the transaction.”
   In addition, Brazil is requiring Maersk to sell Brazilian cabotage subsidiary Mercosul Line.
   Included in the purchase are both Hamburg Süd‘s subsidiary Aliança as well as the tramping business of Hamburg Süd, which deploys 50 bulk carriers and product tankers.
   Maersk said it will acquire Hamburg Süd “on a
cash and debt-free basis.” A Maersk spokesman added, “The debt/cash free basis of enterprise value means that we will take over (and acquired the company without) the financial liabilities from the financing with exception of charters. The current owners of Hamburg Süd will repay the debt themselves.”
   Maersk said it will finance the acquisition
through a syndicated loan facility.
   Combined, the companies will have a total container capacity of around 3.9 million TEUs and an 18.7 percent share of global capacity, Maersk said.
   Maersk already has 3.33 million TEUs of capacity on 634 ships (256 owned and 358 chartered), comprising 16 percent of global capacity, according to industry analyst Alphaliner. It ranks Hamburg Süd as the 10th largest
container carrier today with 567,152 TEUs of capacity on 108 ships (46
owned and 62 chartered), comprising 2.7 percent of global capacity.
    Dirk Visser, senior shipping consultant at Netherlands-based
Dynamar, said comparing the Hamburg Süd acquisition with other recent
deal is difficult, not the least because as a part of the family-owned Oetker Group,
Hamburg Süd did not publish financial results revealing its profits.
   Visser’s analysis shows that
for its $4 billion, Maersk will get a company with $30.6 billion in
sales over the past five years.
    In contrast, he said CMA CGM paid
$2.4 billion, for Neptune Orient Line/APL which also had $2.7 in debt (a total of $5.1
billion) for a company with $32.2 billion in sales over five years.
   
“As an East-West carrier, APL has a broader market spread than
North-South operator Hamburg Süd,” he said. “However, we think that the
latter has a stronger market position in its core trades (Brazil in
particular because of Aliança) than the Singaporeans. If adding APL’s
debts to the price CMA CGM paid for APL, we have the feeling that,
overall, Maersk made the better deal with its acquisition of debt-free
Hamburg Süd.”
    Maersk said when it is combined with Hamburg Sud “the two companies will be
able to realize operational synergies in the region of $350-400
million annually over the first couple of years following completion of
the transaction.
   Hamburg Süd “will maintain its own structure hereunder its
separate brands and is expected to deliver a high customer retention
adding to Maersk Line’s growth agenda,” Maersk added. “The combined network will include an increased number of weekly
sailings, faster transit times, more port calls, more direct
port-to-port calls and less need for transhipment, to the benefit of
both Maersk Line and Hamburg Süd customers.”
   Maersk said its sister company, APM Terminals, will benefit from increased volumes, specifically at its container terminals in Latin America.
   “We consider the purchase price of 3.7 billion euros a fair
valuation of Hamburg Süd,” Maersk Line CEO Søren Skou said. “By keeping Hamburg Süd as a separate and
well-run company, we will limit the transaction and integration risks
and costs while still extracting the operational synergies. The
acquisition of Hamburg Süd will therefore create substantial value to
Maersk Line already in 2019.”
   Maersk said it has agreed to lease the local office of Hamburg Süd in Hamburg “initially for a period of five years.”
   Hamburg Süd said the deal’s closing will take place when all relevant approvals have been received, which is likely to be the case by the end of this year.
   (Correction: This story reflects a downward revision by Dynamar of its estimate for the purchase price of NOL.)