11 November 2015

[111115.EN.SEA] NOL In 'Preliminary' Talks With Maersk and CMA CGM Over Possible Takeover

NEPTUNE Orient Lines, NOL, controlled by Singapore's state investor Temasek Holdings, which has posted four years of consecutive losses, has confirmed that it is in separate talks with AP Moller-Maersk and CMA CGM over a possible acquisition of the US$1.9 billion shipping giant.

The Singapore-based shipping line has been struggling in the prolonged downturn in the global shipping market and earlier this year it sold off its logistics business for $1.2 billion to Japanese freight carrier Kintetsu World Express.

NOL, however, has been looking for a buyer for months. It described the talks with Danish Maersk and France-based CMA CGM, the No. 1 and No. 3 container-shipping operators by capacity, respectively, as "preliminary" in a statement to the Singapore Stock Exchange. 

There haven't been any specific bids discussed, according to one person directly involved in the talks, The Wall Street Journal reported.

Flagging global trade and overcapacity in the $1 trillion business has made things difficult for even the biggest players, forcing many into strategic alliances with each other, cost-cutting efforts and other novel maneuvers to cope.

Maersk, for instance, last week said it was laying off four thousands of its 23,000 land-based employees, slashing costs and reversing course on its own plans to expand its fleet of giant container ships.

Unlike in other industries suffering from such cyclical pressures, consolidation has been rare amid the world's biggest container-shipping players. Several-like NOL-are controlled by deep-pocketed sovereign-wealth funds, whose long-term investment horizons can often outstrip the shipping industry's booms and busts.

The addition of NOL's ships, routes and infrastructure in Asia could provide a significant boost for either Maersk or CMA CGM-assuming the price is right. NOL is highly indebted and, amid the downturn, unprofitable.

"Our preferred route for growth is organic, but we will-as always-study M&A opportunities," a Maersk spokesman said.

"It will depend on the price and whether NOL can complement the relatively limited presence of Maersk and CMA CGM in trans-Pacific routes from Asia to the Americas," according to another person directly involved in the talks.

CMA CGM also confirmed that it is in discussions with NOL. "Given the early stage of those discussions, there is no certainty that a transaction will actually occur," an external spokesperson for the company said.

NOL, which operates globally under the APL brand, has held inconclusive takeover talks over the years with shipping companies including Hapag-Lloyd AG of Germany and Orient Overseas (International) Ltd. of Hong Kong.

Many of the biggest companies have formed large-scale alliances, and these tie-ups are more akin to code sharing among airlines - essentially agreements to share capacity on each others' ships, service vessels and port infrastructure to help lower costs.

However, there has been one major merger last year between Germany's Hapag Lloyd with Chilean peer Compania Sud Americana de Vapores SA of Chile.

If the market improves, CSAV's strong presence in Asia-to-the-Americas routes could complement Hapag's strong presence in Asia-to-Europe trade, said one of the people involved in the NOL discussions. "That's what Maersk and CMA CGM are also looking for if they buy NOL," this person said.

Source : HKSG.

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