Japanese container carrier Kawasaki Kisen Kaisha could be targeted by Singapore-based hedge fund Effissimo, the firm’s largest shareholder as of early August, according to recent media reports.
Kawasaki Kisen Kaisha, Ltd. (“K” Line) could be targeted for takeover by Effissimo Capital Management, the firm’s largest shareholder as of early August, according to recent media reports.
A Japanese hedge fund based in Singapore, Effissimo was founded by former colleagues of activist investor Yoshiaki Murakami and has made a habit of targeting Japanese firms it felt were undervalued by the market.
In June, the firm increased its ownership stake in “K” Line to 34.1 percent, while in August, it upped its share again to 37 percent of the company, making it the largest individual shareholder.
Effissimo in the past has described its investment in “K” Line as a financial holding, rather than an activist effort, but the increased stake has fuel speculation the firm may try to enact changes to bring about more profitable operations.
“They will keep growing their stake and then set about making big changes at the company,” an anonymous source close to both firms told maritime news outlet Splash 24/7.
The ocean shipping industry as a whole has suffered massive losses in the first half of 2016 as tepid global trade volumes and persistent overcapacity continues to weigh on freight rates.
The latest rumors follow a flurry of merger and acquisition activity in late 2015 and early 2016 – the merger of China Shipping with fellow state-run line COSCO, CMA CGM’s purchase of APL parent Neptune Orient Lines, and Hapag-Lloyd’s tie-up with United Arab Shipping Co. (UASC) – and the recent insolvency of South Korea’s largest ocean carrier Hanjin Shipping.
According to ocean schedule and capacity database BlueWater Reporting, “K” Line will be the 14th largest carrier worldwide once the aforementioned consolidation is complete with a combined operating fleet of 385,661 TEUs. It remains, however, the third largest carrier in Japan, behind Mitsui O.S.K. Lines (MOL) with 579,535 TEUs and Nippon Yusen Kaisha (NYK) with 559,841 TEUs.
The carrier is also a member of the CKYHE Alliance along with Hanjin, COSCO, Yang Ming and Evergreen Line. The group, which provides joint container services in the major east-west trade lanes, has essentially ousted Hanjin in the wake of its bankruptcy proceedings, with each member advising customers it will neither load its own cargo on to Hanjin vessels, nor load Hanjin cargo on its own ships.
Japan’s “big three” shipping companies – MOL, NYK and “K” Line – in May agreed to form a new alliance with Hanjin, Hapag-Lloyd and Yang Ming, scheduled to begin operations in first quarter 2017, but it is still unclear whether Hanjin will still be operating by then and what effect its bankruptcy will have on future alliance plans.
“K” Line has said previously it expects to post a net loss of 45.5 billion Japanese yen (U.S. $454 million) for the 2016-2017 fiscal year following a 51.5 billion yen loss the prior year.