Thursday, May 26, 2016

Another Container Freight Shipping Line Acquisition Gets the Go Ahead

Chinese Authorities OK Latest Deal
Shipping News Feature
CHINA – FRANCE – WORLDWIDE – The world’s third largest container shipping line, CMA CGM, has received regulatory approval from China's Anti-monopoly bureau MOFCOM, of its planned acquisition of Singapore-based rival freight carrier Neptune Orient Lines (NOL). Having now received approvals in both China and Europe, CMA CGM is expected to make a formal offer by June 2.

CMA CGM initially made an offer in December 2015 to purchase NOL at a price of S$1.30 per share, valuing the company at S$3.4 billion. The combined company will together operate 563 vessels with 2.4 million TEU worth of capacity, possessing around 11% of the market share. CMA CGM plans to retain and develop the APL brand. NOL has had some serious financial problems, having previously posted four consecutive years of loss, and last year divested itself of APL Logistics, selling the subsidiary to Japan-based freight forwarding and transportation business Kintetsu World Express.

Both CMA CGM and NOL offer their services on many trade routes mainly these days through cooperation agreements with other shipping companies through Vessel Sharing Agreements and alliances. In order to conform to the EU's antitrust regulations, NOL were obliged to leave the G6 alliance. This year so far has seen many announcements of new collaborations designed to overhaul an industry facing overcapacity and declining freight rates. CMA CGM/NOL now look likely to join COSCOCS, Evergreen Line and OOCL to form the Ocean Alliance which will hold approximately 26.2% of the global market share, better competing with currently the largest alliance 2M which boasts a 28.1% share.

Formation of the Ocean Alliance would see the break-up of both the CHYKE and G6 Alliance, and leave the remaining container lines from the two alliances ‘out in the cold’. This led to an announcement earlier this month from Nippon Yusen Kaisha, Hanjin, Hapag-Lloyd, K-Line, MOL, and Yang Ming of the possible formation of the ‘THE Alliance’, with more freight lines looking to join following negotiations. If you followed all this, best to now go sit down for a bit.