CMA CGM, Maersk in Talks to Buy Singapore’s Neptune Orient Lines

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November 7, 2015


By Joyce Koh, Jonathan Browning and Aaron Kirchfeld

(Bloomberg) — Neptune Orient Lines Ltd. said it’s in separate talks with France’s CMA CGM SA and Denmark’s A.P. Moeller-Maersk A/S on a potential sale of the Singapore container shipping company.

“NOL has a duty to assess all options to maximize shareholder value and improve its competitiveness,” the company said in a statement to the Singapore stock exchange Saturday, adding that the discussions are preliminary and there’s no assurance that a definitive agreement will be reached.

CMA CGM has made a preliminary offer for Neptune Orient, which has a market value of S$2.7 billion ($1.9 billion), people with the knowledge said earlier, asking not to be identified as the information is private. Marseille-based CMA CGM is now conducting due diligence, though it hasn’t been granted exclusivity, according to one of the people. Maersk is also in talks about an acquisition of Neptune Orient, though the discussions are less advanced, the people said.

Unlikely Deal

A deal is unlikely to be struck soon, as the slumping shipping sector damps the appetite for aggressive bidding, two of the people said. Temasek Holdings Pte, the Singapore state investment company that owns 67 percent of Neptune Orient, may not be willing sell its stake at a low price, they said.

The shipping company that helped cement Singapore’s status as a global trade hub is attracting takeover interest after simplifying its structure earlier this year by selling its $1.2 billion logistics unit. Neptune Orient, created in 1968 and now Southeast Asia’s largest container line, ran up $1.2 billion of losses in the last four financial years as sluggish global commerce and overcapacity ate into shipping rates.

Neptune Orient gained 6.6 percent to S$1.045 in Singapore trading Friday. Maersk shares rose 2.4 percent at the close in Copenhagen.

Acquiring Neptune Orient would help consolidate CMA CGM’s No. 3 position in container shipping as it competes with market leaders Maersk and Mediterranean Shipping Co. Neptune Orient’s APL container unit has a 2.7 percent market share, while CMA CGM controls 8.9 percent of the market, according to data from industry consultant Alphaliner.

‘Look at Everything’

CMA CGM, founded in 1978, has a fleet of 467 vessels transporting 12.1 million twenty-foot equivalent units of cargo annually, according to its website. Representatives for CMA CGM, Neptune Orient and Temasek declined to comment.

“We’ve always said that we will look at everything that comes up for sale in the market but our base strategy is to grow organically,” Maersk Chief Executive Officer Nils Smedegaard Andersen said in a phone interview Friday, declining to comment specifically on whether Maersk is looking at Neptune Orient. “In general we welcome any consolidation — that would only be healthy for the container line industry.”

Hapag-Lloyd AG, Germany’s biggest shipping line that started trading on the Frankfurt stock exchange on Friday, has repeatedly flirted with the idea of teaming up with Neptune Orient. Billionaire stakeholder Klaus-Michael Kuehne said in an interview, which ran in Swiss newspaper Finanz & Wirtschaft in June, that combining the two companies would be “interesting,” though a challenge as Neptune Orient is “not in good shape.”

Shares in Hapag-Lloyd, the world’s No. 5 carrier, gained 1.5 percent on their debut Friday, giving it a market capitalization of 2.4 billion euros ($2.5 billion).

Kintetsu World Express Inc. earlier this year bought Neptune Orient’s APL Logistics Ltd. for 144.2 billion yen ($1.2 billion) to help the Japanese company broaden its revenue base. Neptune Orient, which has sold its main office building and some vessels amid four consecutive years of losses, disposed the logistics unit to take out cash and focus on boosting its container-line business.

–With assistance from Klaus Wille and Kyunghee Park in Singapore, Francois de Beaupuy in Paris, Christian Wienberg in Copenhagen and Nicholas Brautlecht in Hamburg.

©2015 Bloomberg News

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