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CMA CGM has entered exclusive discussions to acquire Neptune Orient Lines (NOL), overcoming competition from Maersk. The exclusivity period is expected to run until December 7, 2015.
A statement from the French carrier said: “Should these discussions lead to an agreement, such a combination would contribute to the consolidation of the container shipping industry, at a time when scale is more critical than ever.”
The takeover “would further reinforce CMA CGM as a global force in container shipping, leveraging the strong geographic and operational complementarity of both groups,” it added.
NOL is the owner of American President Lines (APL), which is the 13th biggest container shipping line in the world with a fleet of 0.54m teu, according to Alphaliner; CMA CGM is third with 1.8m teu.
The Singapore-based carrier made a loss of US$104m in the first three quarters of 2015, as volumes and freight rates have declined. On top of this, industry analysts have told CM that the Singaporean government no longer sees NOL as such an important geopolitical and strategic tool.
NOL is 65% owned by the Singapore state’s sovereign wealth fund Temasek Holdings who decided to put the company up for sale around July 2015.
On October 11, 2015, Maersk Line’s CEO Soren Skou told The Wall Street Journal that container shipping consolidation was the next step for Maersk after vessel-sharing agreements.
“Maersk Line spends half a billion dollars in [information technology] every year. It is big money. In consolidation, the cost would be shared. It is the same with operating individual headquarters and the cost of containers,” he added.
In mid-November, industry analyst Drewry stated that any deal would “be motivated by opportunity rather than logic”. It noted: “Buying APL would represent a big step-change for CMA CGM as its previous mergers and acquisitions (M&A) diet has consisted of absorbing much smaller regional carriers, but we consider the French carrier has the bigger imperative to buy APL, but that it could be outgunned by its deeper-pocketed rival [Maersk].”
“CMA CGM is smaller than Maersk in the Transpacific and would benefit from access to APL’s large base of high-end textile and other time-sensitive product customers, as well as its profitable US government contracts linked to the use of US-flag vessels, both of which Maersk already has.”
However, Drewry also claimed that “if CMA CGM were to acquire NOL, it will potentially see a credit ratings downgrade and renewed pressure on its credit matrix.”
The London-based analyst also highlighted APL’s terminal portfolio of nine facilities in Asia, the US and Europe. These include 100% stakes in Terminal 3 in Kaohsiung, Taiwan, one terminal each in Kobe and Yokohama, Japan, and the Global Gateway South terminal in Los Angeles, USA.
The world’s fifth and sixth biggest shipping lines, Cosco and China Shipping, are also thought to be in merger talks, both are owned by the Chinese government. Together, they would become the fourth biggest shipping line in the world.