Hapag-Lloyd IPO Will Be Attractive After Turnaround, CEO Says

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January 16, 2015

Hapag-Lloyd file photo

Nicholas Brautlecht

(Bloomberg) — Hapag-Lloyd AG, Germany’s biggest container shipping line, will be an attractive investment once results improve and costs are reduced, Chief Executive Officer Rolf Habben Jansen said.

The Hamburg-based company, which doesn’t expect a return to profit before 2016, is unlikely to stage an initial public offering before November as it needs time to integrate Cia. Sud Americana de Vapores SA’s container assets after a merger with its Chilean rival last year, he told reporters at a dinner in Hamburg yesterday.

“I can fully understand that many people are questioning now whether there is an equity story; that’s why I said it is our first, second and third priority to improve our business,” Habben Jansen said. “If we do that and also have a sound plan for the time ahead, I am convinced that there will be interest in the company.”

Hapag-Lloyd last April agreed to take over CSAV’s container shipping assets to create the world’s fourth-largest liner with about 200 vessels, as it tries to close the gap on the industry leaders, including A.P. Moeller-Maersk A/S.

An IPO, which will probably take place in Germany, will help Hapag-Lloyd to reduce its $3.5 billion debt burden as interest payments on loans are expected to fall, the CEO said.

Vessel Utilization

The company plans cost cuts of “significantly” more than $100 million this year, mainly by improving inland cargo services and by boosting vessel utilization, Habben Jansen said. Lower fuel prices will also help cut expenses, though the current low oil prices will probably be temporary, he said.

This year’s planned savings are in addition to annual synergies of at least $300 million expected from the CSAV merger, the executive said.

Hapag-Lloyd raised 370 million euros ($430 million) last month from two of its biggest shareholders after completing the CSAV takeover. Billionaire Klaus-Michael Kuehne provided 111 million euros and CSAV another 259 million euros, mainly to allow the carrier to modernize its fleet.

The company now has enough cash to order new vessels, probably in the second quarter, Habben Jansen said. Hapag-Lloyd is considering acquiring further stakes in container terminals in ports other than Hamburg, where it has operated the Altenwerder terminal in a joint venture with Hamburger Hafen & Logistik AG since 2002, he said.

Tour operator TUI AG, which holds a 14 percent after the capital increase, has said it plans to sell its shares as part of an IPO unless it can dispose of them earlier.

Copyright 2015 Bloomberg.

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