While it has been understood that Neptune Orient Line’s (NOL) owners have been interested in selling the company for some time, the recent news that Maersk or CMA CGM would be interested in buying it is more of a surprise.
In a statement to the Singapore Stock Exchange on Friday (7/11), NOL, which is largely owned by the Singapore sovereign wealth fund Temasek, admitted that it “is in preliminary discussions with CMA CGM SA and A.P. Moeller-Maersk A/S with respect to a potential acquisition of NOL”.
The statement went on to state that “NOL has a duty to assess all options to maximise shareholder value and improve its competitiveness. From time to time, NOL enters into discussions on possible combinations involving NOL, while remaining focused on returning its core liner business to sustainable growth and profitability”.
The reaction from Maersk confirmed that the talks were taking place with comments to the Wall Street Journal that it would “study any M&A opportunities”. Other that Maersk’s CEO, Nils Smedegaard Andersen, has refused to be drawn on the direction of the talks.
The news leaking from CMA-CGM is more interesting with Bloomberg reporting rumours from the Marseilles-based shipping line that it has offered US$1.9bn for NOL. The report goes on to say that CMA-CGM is about to start due diligence on the rival shipping line.
Of course the container shipping sector has been consolidating for a couple years and NOL has been a particular target with Klaus-Michael Kuhne, part owner of Hapag-Lloyd, known to be interested. However such is the state of the container shipping market that it is difficult to know what such an asset as NOL would be worth. On Friday Maersk, which is one of the more healthy lines, issued a cautionary statement about the deteriorating prospects for the container market characterised by rapidly slowing global trade. Whilst the company is still profitable, Maersk has drawn back from its fleet expansion programme, so adding further capacity through acquisition would suggest a considerable price incentive.
GLOBAL SUPPLY CHAIN INTELLIGENCE (GSCi)