Dec 08, 2015

    Neptune Orient Lines poised for $3.38 billion buyout

    SHIPPING line Neptune Orient Lines (NOL) is set to be sold to French shipping giant CMA CGM in a $3.38 billion deal.

    The container shipping firm - South-east Asia's largest - confirmed in a filing to the Singapore Exchange yesterday that it has received an offer of $1.30 a share from CMA CGM for some 2.6 billion units.

    It represents a 33 per cent premium to NOL's three-month volume-weighted average share price to July 16.

    It is also higher than the stock's last closing price of $1.225 on Friday, before a trading halt was called yesterday morning.

    Both NOL and France's CMA CGM, the third largest container shipping company in the world, confirmed last month that they were in exclusive talks for the buyout, which will be one of the largest in the industry.

    Temasek, which owns nearly 67 per cent of NOL, has accepted the offer and will tender all of its shares, Reuters reported.

    The deal would require anti-trust approvals from the United States, Europe and China. After they are obtained, a formal offer is expected to be launched around June next year, NOL chief executive Ng Yat Chung told a briefing.

    The deal will allow CMA CGM, which is private and family-owned, to "cement its position among the global leaders in the container shipping industry", said the statement.

    "It will create a new global force in shipping, with a capacity of 2,399,000 TEUs (20-foot equivalent units), a market share of approximately 11.5 per cent, a fleet of 563 vessels and a combined turnover of approximately US$22 billion (S$28.1 billion)."

    CMA CGM also aims to "expand and strengthen its presence in Singapore", reinforcing Singapore's leadership in the maritime and shipping sector as part of the enlarged group's strategy in Asia, as it plans to use Singapore as a key hub in Asia and establish its regional head office here.

    Rodolphe Saade, vice-chairman of CMA CGM, said in a joint press statement: "At a time when the shipping industry is facing strong headwinds, scale is more critical than ever to capitalise on synergies and capture growth opportunities wherever they arise."

    The shipping giant has been facing mounting pressure to expand, given that two state-owned Chinese carriers, China Ocean Shipping and China Shipping Group, are in advanced talks to merge.

    Analysts have said the acquisition of NOL will help strengthen CMA CGM's presence in areas where it is lacking, especially on the trans-Pacific routes.

    NOL, with a market capitalisation of $3.19 billion as at Dec 4, has been looking for a buyer for months.

    The firm has high debt levels and has not been profitable in recent years amid the downturn in global shipping. In May, it sold its logistics business, APL Logistics, for US$1.2 billion to Japan's Kintetsu World Express.

    "The combined market presence delivered by the transaction would achieve the scale needed to enhance competitiveness for NOL's operations and offer a clear and sustainable long-term direction for the combined entity," said NOL's Mr Ng.

    Added Tan Chong Lee, head of portfolio management at Temasek: "We also note and welcome the commitment of CMA CGM to enhance Singapore's position as a key maritime hub and grow Singapore's container throughput volumes."

    CMA CGM will eventually consider listing the combined entity after the acquisition of NOL and the venue could be Singapore, said Mr Saade.

    "Why not Singapore," he told reporters at a news conference, about a future listing.