Maersk in major revamp to ride out weak market
Shipping and energy to separate
ROCKED by low freight and oil prices, Denmark’s MollerMaersk will split itself up and focus on transport and logistics, while seeking a way out of energy in a keenly anticipated revamp aimed at reviving its fortunes.
The 112-year-old conglomerate will focus on its core businesses, comprising Maersk Line, APM Terminals, Damco, Svitzer and Maersk Container Industry, while seeking “solutions” for its smaller energy operations.
Investors gave the news a cautious welcome, with Maersk shares trading slightly higher yesterday. But some said the $30 billion (R413bn) company had not gone far enough.
“It might be one of the most pain-free solutions relative to other scenarios, but they could have gone even further,” Nykredit analyst Ricky Rasmussen said yesterday.
Pressure on profits
The weak market has hit the big lines, which have invested heavily in “mega-ships”, largely to operate the main Asia to Europe trade route.
Industry sources have questioned whether there is enough work for the biggest container vessels on the high seas at the moment, putting more pressure on profits.
“Separating our transport and logistics businesses and our oil and oil-related businesses… will enable both to focus on their respective markets. Both face very different underlying fundamentals and competitive environments,” chairman Michael Pram Rasmussen said in a statement.
Maersk said it would look for solutions for its oil and oil-related businesses, which will be split from the main company either individually or in combination “in the form of joint-ventures, mergers or listing”.
The company gave no details on how far this process had already progressed or whether it was talking to any possible partners, but said it would be done within 24 months.
Maersk Drilling boss Claus V Hemmingsen will lead Maersk’s energy division through the change and serve as vice-chief executive of the group, beginning on October 1.
“Maersk Oil… is a small player, so there are many players big enough to take (it) in. Drilling is relatively large, but its competitors are under extreme financial pressure, so it’s less likely to find a sale opportunity
The estimated value of Moller-Maersk conglomerate
there,” Morten Imsgard, an analyst at Denmark’s Sydbank, said.
Maersk will hope that by splitting up it can shed any conglomerate discount by allowing markets to value its businesses individually.
Active role
The group, controlled by the Maersk family, was founded in 1904 by AP Moller and was turned into a conglomerate operating in 130 countries by his son, Maersk-McKinney Moller, who had an active role in the company until he died in 2012 aged 98.
Sydbank estimates the new transport and logistic division could be worth 174 billion to 229 billion Danish crowns (R359bn to R472bn), while the energy division could be valued at 74 billion to 153 billion Danish crowns.
Driven by the container shipping downturn and a slump in oil prices, AP MollerMaersk group’s chief executive Nils Smedegaard Andersen left in June and Soren Skou, the head of Maersk Line, was named group chief executive.
The company has also appointed a new group chief financial officer, Jakob Stausholm, effective from December 1.
The world’s biggest container shipping business and its competitors are suffering from record low freight rates as growth in global trade has failed to keep pace with a big expansion in shipping fleets. – Reuters