Cosco to buy rival shipper for $6.3 billion
July 10, 2017
Cosco has offered $6.3 billion (49.2 billion Hong Kong dollars) to buy Hong Kong-based rival Orient Overseas International Ltd. The move is the latest in a consolidation wave which started after the 2008 financial crisis, and led to too many vessels chasing too little cargo and shrinking freight rates.
On its own, Cosco ranks No. 4 globally with 317 ships and 8.4 percent of container traffic. Adding Orient Overseas' 100 ships would give it a market share of nearly 12 percent.
The new company, Cosco-OOIL would therefore be the third-largest shipping player behind Danish conglomerate Moeller-Maersk with 643 ships and 16.4 percent of container traffic, and Mediterranean Shipping Company, headquartered in Switzerland.
China's long arm
Shares in Orient Overseas were up 19 percent in afternoon trading in Hong Kong on Monday, while Cosco rose five percent.
Once the deal is completed, Cosco will hold 90.1 percent of Orient Overseas, while Shanghai International Port will hold the remaining stock.
But the companies will continue to be listed separately on the Hong Kong exchange and Orient Overseas's global headquarters will remain in the city.
The family of former Hong Kong Chief Executive Tung Chee-hwa owns 68.7 percent of shipper Orient Overseas and has agreed to the offer.
The rough seas
A recent wave of mergers has created huge competitors in a global shipping industry that is struggling with sluggish trade and depressed prices. Industry leaders are hoping a string of recent mergers will once again boost shipping rates.
In October 2016 Japan's three biggest shipping companies, Nippon Yusen Kabushiki Kaisha, Kawasaki Kisen Kaisha and Mitsui O.S.K., 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 Hapag-Lloyd and United Arab Shipping merged this year.
The big looser so far is South Korea's titan Hanjin Shipping which was officially declared bankrupt by a regional court in early 2017, further slimming down the field in a reflection of the slump in global trade and a growth slowdown in China.
tr/jf (AP, AFP)