Neptune Orient Lines, parent of liner company APL, has confirmed it has entered into talks with CMA CGM and Maersk about a potential sale, while COSCO and China Shipping told FMC Commisioner William Doyle they are in the “beginning stages of a merger.”
Neptune Orient Lines, the parent company of the container carrier APL, has confirmed that it is in discussions with both Maersk and CMA CGM about a possible acquisition of the company.
In a notice posted on the Singapore Stock Exchange on Saturday, NOL said it “confirms that it is in preliminary discussions with CMA CGM SA and A.P. Møller-Maersk A/S with respect to a potential acquisition of NOL.”
“There is no assurance that any such discussions will result in any definitive agreement or transaction, or that any offer for NOL will be made or as to the terms on which any such offer might be made,” NOL added. The CMA CGM and Maersk offers are apparently competing bids for the Singapore-based carrier.
NOL sold its APL Logistics business to Japan’s Kintetsu World Express back in May.
Temasek, the sovereign wealth fund of the Singapore government, has a 67 percent interest in NOL, about 26 percent directly and 41 percent through shares held by its associated company and subsidiaries, according NOL’s annual report for 2014. NOL was founded in 1968 by the Singapore government and acquired American President Lines, which now does business using just the initials APL, in 1997.
CMA CGM confirmed “preliminary discussions are being held concerning a potential combination with Neptune Orient Lines Limited. Given the early stage of those discussions, there is no certainty that a transaction will actually occur.”
Maersk also put out a statement that said, “Our preferred route for growth is organic, but we will – as always – study M&A opportunities. We have no comments re: NOL.”
Just last week, during a phone call with securities analysts to discuss his company’s third quarter results, Nils Andersen, chief executive officer of the A.P. Møller-Maersk conglomerate, said that while Maersk Line had cancelled options for some eight containerships and was postponing a decision on whether to build another eight ships, the company was not in a “cutting mode” for capital expenses.
“We’re willing to go into M&A activities and so on,” said Andersen.
Meanwhile, there was confirmation of merger plans by the Chinese container carriers COSCO and China Shipping as well.
Federal Maritime Commissioner William P. Doyle said in a statement on Friday that the state-owned Chinese shipping companies told him during a visit to Shanghai they “are in the beginning stages of a merger.”
While a merger between the two companies has been widely reported and they have suspended trading of their stocks since Aug. 10, the two Chinese companies have said little about their plans. COSCO said in an announcement posted on its website last Friday, for example, that it is “planning a material event,” but did not elaborate further.
Doyle made his remarks after meeting in Shanghai with executives from China’s two largest liner companies. He was in China as part of the U.S.–China Maritime Bilateral Consultations this week in Suzhou, China.
He said the FMC and U.S. Maritime Administration had “a successful week of discussions with China with respect to commercial maritime relations. I’d like to thank the Chinese delegation led by Deputy Director Wang Mingzhi of the Ministry of Transport for their warm welcome and hospitality while in Suzhou.”
“We discussed many matters including the recent chemical explosion in the port of Tianjin, overcapacity in the liner trade, tariffs, potential COSCO–CSCL merger, and China’s pilot program regarding four free trade zones,” he added.
Doyle fielded questions from the executives at COSCO and China Shipping regarding communications with the FMC and advised them “to work closely with FMC staff.”
“The topics of discussion included the alliances that COSCO and CSCL are currently members of, and, to what extent, that may change during merger talks and post-merger,” said Doyle.
COSCO is a member of the CKYHE alliance, along with Japan’s “K” Kine, South Korean-based Hanjin Shipping, and Yang Ming and Evergreen Line of Taiwan, while CSCL is part of the Ocean3 Alliance with CMA CGM and United Arab Shipping Company.
The FMC voted this week to allow COSCO Europe’s petition for exemption from the government controlled carrier 30-day filing requirements on lowering tariff rates, according to Doyle.
Lars Jensen, chief executive and partner in SeaIntelligence Consulting, said he would see an acquisition of NOL as “another step in the industry’s long and slow progression towards consolidation. Secondly, I see it as an opportunity for a buyer to improve their vessel portfolio – after all, APL has no orderbook but a range of new vessels in the size around 10,000 TEUs. In other words it allows for either fleet expansion or fleet renewal without having to wait a couple of years as well as without further worsening the supply/demand situation in the industry.
“The challenge is going to be one of price, as even though the assets might be OK, the financial (and hence commercial and operational) performance is not good and a buyer would need to deal with that in a swift and efficient manner,” added Jensen.
Dirk Visser, senior shipping consultant at Dynamar and managing editor of the DynaLiners newsletter said he was not sure “why Maersk would be interested in more of the same. Additional America flag ships? A decisive lead on partner MSC? Hurting the G6 Alliance?”
He said an acquisition might result in a good deal on 50 relatively young, owned ships of between 2,500 and 13,900 TEU capacity “plus a substantial goodwill. I think that APL is a class operator.”
But it also might be difficult for Maersk merge with NOL at a time when the former just announced plans to reduce staff by 4,000.
As to why Temasek might want to sell the container shipping company, Visser said it “has generally not brought in sufficient revenues since its purchase.”
“Temasek apparently wanted to keep control to cement the position of Singapore as a (very) prominent transhipment port but has now apparently arrived at the conclusion that a Singapore flag carrier is no longer required to maintain that position,” he said.
According to Jensen, other companies, including Hapag-Lloyd, might have an interest in acquiring NOL, but it is unlikely anyone will be able to compete with Maersk in the acquisition arena. “I don’t think that they want to take up the fight with Maersk.” Jensen also mentioned United Arab Shipping Company as a potential suitor for the Singapore company.
Ocean shipping industry set for next wave of consolidation
