China’s COSCO in multi-bil­lion buy­out of Hong Kong ri­val

Kuwait Times - - BUSINESS -

Chi­nese ship­ping gi­ant COSCO has of­fered $6.3 bil­lion to buy Hong Kong’s ri­val firm Ori­ent Over­seas In­ter­na­tional Ltd, which would make it one of the world’s largest con­tainer lin­ers in an in­dus­try dom­i­nated by European play­ers. The move is the lat­est in a con­sol­i­da­tion wave fol­low­ing the 2008 fi­nan­cial cri­sis, which led to too many ves­sels chas­ing too lit­tle cargo and shrink­ing freight rates.

In­dus­try lead­ers are hop­ing the string of merg­ers will boost rates once more. COSCO-OOIL would be­come the third­largest ship­ping player be­hind Dan­ish con­glom­er­ate Maersk and Mediter­ranean Ship­ping Com­pany, head­quar­tered in Switzer­land, if the takeover is given the green light. The com­ple­tion of the buy­out will de­pend on ap­proval from reg­u­la­tors and COSCO share­hold­ers, the com­pa­nies said in a state­ment Sun­day.

Shares in OOIL were up 19 per­cent in af­ter­noon trad­ing in Hong Kong on Mon­day, while COSCO rose five per­cent. State-owned COSCO said it will pay share­hold­ers of the smaller pri­vately owned OOIL HK$78.67 per share in cash, a 31 per­cent pre­mium over the stock’s last clos­ing price, ac­cord­ing to Bloomberg News.

The fam­ily of for­mer Hong Kong leader Tung Chee-hwa has ac­cepted the of­fer for its 68.7 per­cent stake in OOIL and is pro­jected to make more than $4 bil­lion out of the deal. “This de­ci­sion has been care­fully con­sid­ered and we be­lieve it helps en­sure the fu­ture suc­cess of OOIL,” said Andy Tung, the Hong Kong firm’s ex­ec­u­tive di­rec­tor, in a state­ment. COSCO chair­man Wan Min said the com­pany re­mained “com­mit­ted to en­hanc­ing Hong Kong as an in­ter­na­tional ship­ping cen­tre”.

“We re­spect OOIL’s man­age­ment team and its ex­per­tise, not to men­tion its peo­ple, brand and cul­ture,” he added. Once the deal is com­pleted, COSCO will hold 90.1 per­cent of OOIL, while Shang­hai In­ter­na­tional Port will hold 9.9 per­cent. But the com­pa­nies will con­tinue to be listed sep­a­rately on the Hong Kong ex­change and OOIL’s global head­quar­ters will re­main in the city.

COSCO also vowed to re­tain all em­ploy­ees and their ben­e­fits, the state­ment said. The move would give the com­pany more than 400 ships and a ca­pac­ity of 2.9 mil­lion con­tain­ers, ac­cord­ing to in­de­pen­dent re­search com­pany Cru­cial Per­spec­tive. Ja­son Chi­ang, Sin­ga­pore­based di­rec­tor at Ocean Ship­ping Con­sul­tants, pre­dicted the COSCO buy­out would be the last of the ma­jor merg­ers. “Bad times in the in­dus­try made M&As nec­es­sary but with rates re­cov­er­ing that need will be­come less,” he told Bloomberg.

In Oc­to­ber 2016 Ja­pan’s three big­gest ship­ping com­pa­nies, Nip­pon Yusen Kabushiki Kaisha, Kawasaki Kisen Kaisha and Mit­sui OSK, agreed to merge, with com­bined op­er­a­tions set to start in April 2018. Last year, France’s CMA CGM com­pleted a takeover of Sin­ga­pore’s Nep­tune Ori­ent Lines while Germany’s Ha­pagLloyd and United Arab Ship­ping merged this year. South Korea’s ti­tan Han­jin Ship­ping sank into bankruptcy in 2016, fur­ther slim­ming down the field in a re­flec­tion of the slump in global trade and a growth slow­down in China. —AFP

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