GERMANY's Hapag-Lloyd, the world's No 6 container carrier, has agreed to merge with United Arab Shipping Company (UASC), the world 11th biggest, making the Hamburg carrier the fifth largest in the world once the deal is done.
With the approval of the Hapag board, the deal was made on Tuesday with Dubai's UASC on a merger that was termed a "business combination agreement", and one which would provide for the contribution of all shares in UASC to Hapag-Lloyd.
The combined companies are seen as a good match because of UASC's strong presence in the Middle East where Hapag-Lloyd currently depends on agents, reports American Shipper.
UASC shareholders, which consist of six countries in the Middle East, would become major shareholders in a long established global container carrier.
UASC has been an aggressive builder of large new ships, and a combination will increase the tonnage of the newly formed company, but do little to ameliorate the over capacity afflicting the sector.
The transaction is based on valuations that would give Hapag shareholders 72 per cent ownership of the whole, and holders of UASC the rest. The combined company will be worth around US$9 billion, people involved in the merger said.
The talks come amid a wave of consolidation sweeping the container shipping industry, which is squeezed by overcapacity, slowing global growth and plummeting freight rates.
Amid those turbulent waters, a number of big companies in recent years have combined forces to cut costs and increase competitiveness, reports Bloomberg News.
At the same time, operators have been scrambling to form alliances, broad operational partnerships that have allowed them to cut costs without a full-blown merger or takeover, reports the Wall Street Journal.
UASC is owned by the governments of Qatar, Saudi Arabia, Kuwait and the United Arab Emirates. Qatar has 51 per cent and Saudi Arabia 35 per cent.
A merger would provide Hapag-Lloyd access to UASC's six Triple-E's, part of the world's biggest class of containerships, costing $150 million each, can move more than 18,000 TEU at a time.
UASC primarily operates in the Asia-to-Europe trade route, and a merger with Hapag would give it wider access to the transatlantic and transpacific loops.
Source : HKSG.