CMA CGM has announced a pre-conditional voluntary general cash offer for Neptune Orient Lines (NOL). Temasek and its affiliates, NOL’s majority shareholders, have irrevocably undertaken to tender all of their shares in acceptance of the offer.
Upon the satisfaction of the pre-conditions, namely approvals from antitrust authorities, CMA CGM is expected to launch an offer at a price of SG$1.30 per share, which represents a 49% premium to NOL’s unaffected share price and a 33% premium to NOL’s three-month volume-weighted average share price to July 16, 2015.
Commenting on this transaction, Rodolphe Saadé, Vice-Chairman of CMA CGM, said, “Leveraging the complementary strengths of both companies, CMA CGM will further reinforce its position as a leader in global shipping with combined revenue of US$22bn and 563 vessels.” adding “At a time when the shipping industry is facing strong headwinds, scale is more critical than ever to capitalize on synergies and capture growth opportunities wherever they arise.”
Ng Yat Chung, CEO of NOL said, “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. The transaction would enable NOL to grow as part of a larger entity with the resources of the world’s third largest container shipping line.”
According to the announcement, CMA CGM has 469 vessels and a global market share of 8.8%. In 2014, the Group handled over 12m TEUs and generated US$16.74bn in revenues. A founding member of the Ocean Three Alliance with UASC and CSCL, CMA CGM is present across 160 countries, with 22,000 employees in 655 offices, and has a fleet capacity of 1,781 thousand TEUs.
NOL currently operates under the American President Lines (APL) brand. In 2014, the company reported revenues of US$7.04bn. At present, NOL has more than 7,400 employees in 180 offices across more than 80 countries and operates 94 vessels, representing 618 thousand TEUs in fleet capacity.
Following the acquisition, the combined company is expected to have capacity of 2,399 thousand TEUs and combined fleet of 563 vessels with a market share of approximately 11.5% (vs 8.8% for CMA CGM and 2.7% for NOL) and a combined turnover of roughly US$22bn.
According to the company, CMA CGM has a strong position on the Asia-Europe, Asia-Mediterranean, Africa and Latin America routes, whilst APL is strong along the Transpacific, Intra-Asia and Indian subcontinent shipping routes. The combined company is expected to strengthen its position on strategic shipping routes, especially US, Intra-Asia and Japan. Following the transaction, it is expected the combined group would hold market shares from 7% to 19% on the routes on which it operates.
It is expected that the acquisition will provide advantages such as the optimization of vessels and occupancy rates on routes, economies of scale in terms of purchasing costs, logistics costs and chartering costs and a larger and more flexible fleet, allowing the deployment of the most efficient vessels on any given route
The transaction is valuing NOL at a price to book ratio of 0.96 times. The transaction is due to be financed by a combination of available cash and bank financing provided by a syndicate of international banks.
The offer will be launched after approval of the relevant authorities which is expected by mid-2016.
