Tuesday, December 2, 2014

Approval for World's Fourth Largest Container Shipping Line Granted

Final Sanction to Join Two Companies from Different Continents
Shipping News Feature

WORLDWIDE – After months of waiting for regulatory approval from relevant competition authorities around the world, the path is now clear for Hapag-Lloyd and Compañía Sud Americana de Vapores (CSAV) to join forces to become the world’s fourth largest container shipping company. In gaining approval from the remaining authorities, China and Ukraine, over the last couple of days, all condition precedents were fulfilled and the main processes of integrating CSAV’s container business into Hapag-Lloyd’s organisation are expected to be completed by the end of the second quarter of 2015.

The merger of Hapag-Lloyd with the container business activities of the Chilean shipping company founded in Valparaíso in 1872, is expected to result in annual savings of at least $300 million. The merged company will have around 200 vessels with a total capacity of approximately one million TEU, transporting some 7.5 million TEU every year and will set up its fourth regional headquarters in Valparaiso. With revenue of around $12 billion, the combined entity joins an elite group of international shipping companies. Oscar Hasbún, CEO of CSAV, commented:

“We are very proud of the fact that our two long-established companies will now become one of the most prominent players in the global container shipping industry and that this Company has a firm foothold in Latin America, including our home market of Chile. We fit together perfectly thanks to our complementary network, our customer structure, and our excellent professionalism and reputation.”

In addition to integrating CSAV’s container business into Hapag-Lloyd, there are also plans to strengthen the Company by raising capital of €370 million by 31 December 2014, in which CSAV will provide €259 million and Klaus-Michael Kuehne's  Kühne Maritime €111 million. The ownership structure of Hapag-Lloyd will therefore change as follows: CSAV will become Hapag-Lloyd’s biggest shareholder with 34% after the cash capital increase. The other shareholders are HGV (23.2%), Kühne Maritime (20.8%), TUI (13.9%), Signal Iduna (3.3%), HSH Nordbank (1.8%), M.M. Warburg (1.8%) and Hanse Merkur (1.1%).

CSAV, HGV and Kühne Maritime have agreed to pool 51% of the shares in Hapag-Lloyd in order to discuss and make key decisions together in the future. Of this pool structure, CSAV owns a 50% participation, while HGV and Kühne Maritime will own 25% each. The €370 million raised will pay for the €200 million in costs associated with the deal and the rest used to strengthen the fleet. More funds are likely to be sought via an IPO in the next yer or so. Rolf Habben Jansen, Chief Executive Officer of Hapag-Lloyd remarked:

“This is a big day for both companies. With Hapag-Lloyd’s strength in Asian traffic and on the North Atlantic, combined with CSAV’s strong position in Latin America, we will become the leading shipping company in this region, and thereby be able to offer our global customers an even more attractive network and wider range of products. Our ability to compete will also be significantly enhanced by closing the gap to the top three of our industry. Our immediate priorities now are to continue to offer excellent service to all of our customers and to honour all the commitments both companies made, whilst we plan the upcoming integration. There will be no major changes to the way we work until the transition to the Hapag-Lloyd systems towards the end of the first quarter 2015.”

The two companies signed the agreement in April, earlier this year and have steadily received approvals from authorities from around the world, including the US, Europe, Brazil, and Mexico, to name but a few. By merging the container businesses, CSAV and Hapag Lloyd replaced Evergreen Line to sit in line behind Maersk, MSC and CMA CGM as the fourth largest container liner shipping company in the world.