After the purchase, container carriers COSCO Shipping Lines and OOCL will continue to operate under their respective brands, with a combined fleet of 400 vessels with capacity exceeding 2.9 million TEUs including orderbook, the companies said Sunday.
The potential $6.3 billion purchase of Orient Overseas (International) Ltd. by Cosco Shipping and Shanghai International Port Group announced over the weekend marks the latest example of the tumult in the global maritime industry over the past couple years, particularly in Asia, a region that’s home to nine of the 10 largest container ports around the world by volume.
In 2016 alone, one Asia-based carrier, Hanjin Shipping of South Korea, went bankrupt, three mergers were announced, and three of the four major container carrier alliances consolidated into two.
Among last year’s developments, in addition to last September’s bankruptcy filing by Hanjin, were the formations the OCEAN Alliance of COSCO Shipping, CMA CGM, Evergreen Marine and Orient Overseas Container Line Ltd., as well as the awkwardly named THE Alliance between ocean carriers Hapag-Lloyd, Yang Ming, NYK, MOL and “K” Line. And since then, Hapag-Lloyd has merged with United Arab Shipping Co. (UASC) and the “Big 3” Japanese lines – NYK, MOL and “K” Line – have begun the process of integrating their container operations into a joint venture dubbed the One Network Express (ONE).
Earlier in 2016, the world’s third-largest container shipping company, CMA CGM SA of France, bought Singapore-based Neptune Orient Lines Ltd., parent of container carrier APL. And back in late 2015, China COSCO Shipping Corp. was formed after China merged its two primary liner shipping entities – the former China Ocean Shipping Group (COSCO) and China Shipping Group (CSCL).
Now comes the potential sale of Hong Kong-based OOIL to state-run conglomerate COSCO and Shanghai port terminal operator SIPG.
Although the companies say both carriers will continue to operate under their own respective brands after the purchase, the deal would further consolidate the Asian shipping market, as in terms of fleet capacity, COSCO and OOIL are among the 10 largest shipping companies in the world. COSCO is the fourth-largest globally, while OOIL subsidiary OOCL subsidiary is seventh in terms of operating fleet capacity.
If and when COSCO Shipping Lines, a subsidiary of COSCO Shipping Holdings, consolidates its vessels with OOCL’s fleet, the combined entity would operate over 400 vessels, with capacity exceeding 2.9 million TEUs including orderbook, the three companies say. And that’s not even mentioning the significant additional capacity to which the firm has access in the major east-west trade lanes via the OCEAN Alliance vessel sharing agreement.
Under the terms of the voluntary conditional offer announced early Sunday morning, COSCO Shipping Holdings would hold 90.1 percent of OOIL, while SIPG would retain 9.9 percent of the company after the $6.3 billion all-cash purchase.
The offer, which at $78.67 Hong Kong (U.S. $10.07) per share represents a 31 percent premium on the last closing price for OOIL, is dependent upon meeting some pre-conditions, including required regulatory approvals and approval from COSCO Shipping Holdings shareholders, according to COSCO and SIPG.
COSCO Shipping Holdings Chairman Wan Min said in a statement the company remains committed to Hong Kong as an international shipping center and that following the purchase of OOIL, COSCO “would continue to invest and strengthen our industry leadership.”
The purchasers have also said that they’re committed to retaining OOIL’s current pay and benefit system, and won’t lay off any OOIL employees for at least two years after the sale closes. OOIL’s current global headquarters and presence in Hong Kong will also be retained.
According to current statistics from maritime industry analyst BlueWater Reporting, The combined company will operate vessels with an aggregate capacity of 2.21 million TEUs, making it the world’s third largest ocean carrier, just ahead of the recently merged CMA CGM and APL with 2.19 million TEUs.