German ocean carrier Hapag-Lloyd will begin integrating its 118 services with United Arab Shipping Co.’s 45 loops in about eight weeks, and officials expect the integration to take until the end of the third quarter.
Germany’s largest ocean carrier, Hapag-Lloyd, completed its merger today with United Arab Shipping Co. (UASC), a Kuwait-based carrier owned by a conglomerate of wealthy Middle Eastern states. Hapag-Lloyd will continue as a publicly traded company registered in Germany, with its headquarters in Hamburg, the carrier said.
A member of the “THE” Alliance vessel sharing agreement with Yang Ming, NYK, MOL and “K” Line, Hapag-Lloyd operates 118 services and a fleet of 172 vessels.
By comparison, UASC has 45 services and a fleet of 58 ships.
The combined fleets of Hapag-Lloyd and UASC will include 230 vessels with a shared capacity of approximately 1.6 million TEUs. Average vessel size will total 6,840 TEUs, and the average ship age will stand at 7.2 years. The merged entity is estimated to carry in excess of 10 million TEUs per year.
The integration of these services will start in about eight weeks, and will take until the end of the third quarter, Hapag-Lloyd said. UASC’s present transport volumes will then be handled on Hapag-Lloyd’s IT platform.
“We now not only have a very strong market position in Latin America and the Atlantic, but also in the Middle East, where we will become one of the leading carriers,” Hapag-Lloyd CEO Rolf Habben Jansen said of the deal. “Our priority now is a smooth and fast integration of UASC and Hapag-Lloyd.”
The business combination agreement for the merger was signed in Hamburg in July 2016, and since then, roughly a dozen competition authorities across the world had to grant their approval.
Going forward, Hapag-Lloyd said it expects to achieve synergies of $435 million annually as a result of the merger. A significant amount of these savings should be realized in 2018, while the full amount is expected to first be reached in 2019.
Hapag-Lloyd will also establish a new regional headquarters in the Middle East, complementing its already existing regional headquarters in North America, Latin America, Asia and Europe.
Two major UASC shareholders, Qatar Investment Authority, through its subsidiary Qatar Holding LLC, and the Public Investment Fund of the Kingdom of Saudi Arabia, will become new key Hapag-Lloyd shareholders. Other UASC shareholders include the Kuwait Investment Authority on behalf of the state of Kuwait, the Iraqi Fund for External Development, the United Arab Emirates and Bahrain, which will be reflected with a combined 3.6 percent of the shares of Hapag-Lloyd as free float shares.
The ownership structure of Hapag-Lloyd before the forthcoming cash capital increase, planned after the merger, includes CSAV 22.6 percent, HGV 14.8 percent, Kühne Maritime 14.6 percent, Qatar Holding 14.4 percent, PIF 10.1 percent, and TUI 8.9 percent. The free float will amount to around 14.6 percent.
Within six months after closing, a cash capital increase by way of a rights issue is planned for Hapag-Lloyd, which will be secured via a backstop commitment in the amount of $400 million that some of the controlling shareholders have agreed to. Shareholders will be asked to approve a corresponding appropriate authorized capital at Hapag-Lloyd’s annual general meeting on May 29.
“Hapag-Lloyd has long-term and extensive know-how when it comes to acquisitions. By merging with the Canadian shipping company CP Ships in 2005 and, more recently, with CSAV in 2014, we have demonstrated that we are able to combine businesses and integrate them quickly, efficiently and profitably,” Habben Jansen said. “We are optimistic that we will be able to complete the integration of UASC by the end of this year.”
Hapag-Lloyd’s merger with UASC follows a string of mergers, acquisitions and consolidation in 2016, including the merger of state-run Chinese lines COSCO and China Shipping; CMA CGM of France’s acquisition of Singapore-based APL parent Neptune Orient Lines; Hanjin declaring bankruptcy; and Japan’s Big 3 carriers – NYK, MOL and “K” Line – announcing their intent to combine their container businesses. Just last month, there was also a reduction in ocean carrier alliances on major east-west trades from four to three.
Meanwhile, COSCO SHIPPING Holdings has suspended trading in its shares since May 17, the company said. Trading in the company’s shares will continue to be suspended from May 24 onwards, as speculation continues on whether COSCO may be potentially buying Orient Overseas Container Line (OOCL). Yang Ming might be a target as well, given its poor financial condition, but both OOCL and Yang Ming have been quick to deny or have “no comment” on any rumors.
NEWS FLASH: Hapag-Lloyd finalizes merger with UASC
