High Shipping Costs Are Here to Stay, Says Bloomberg
By Henry Ren (Bloomberg) Stubbornly high shipping expenses for businesses are getting sealed into contracts for the next 12 months, forcing companies to pass the extra costs on to consumers....
By Nicholas Brautlecht
(Bloomberg) — Hapag-Lloyd AG adjusted its initial public offering plan for the third time this month, potentially depriving part-owner TUI AG of an option to sell any of its holding, in a bid to attract investors spooked by a dismal outlook from shipping-industry leader A.P. Moeller-Maersk A/S.
The Hamburg-based container carrier, citing “ongoing market volatility,” now plans to sell stock at 20 euros to 22 euros apiece, offering a total of 15.2 million shares that include 13.2 million in a capital increase. TUI, which holds 14 percent of Hapag-Lloyd, is reducing the number of shares it’s seeking to sell to 1.9 million, now restricted to an over-allotment offering to meet any excess demand. The German tour operator had originally planned to sell as many as 4.2 million existing shares in the shipping company.
Hapag-Lloyd is going public as the container-shipping industry battles an oversupply of vessels and low freight rates. Friday’s price reduction follows a 40 percent cut in planned proceeds to $300 million on Oct. 14, a goal it’s sticking to, and a one-week extension of the offer period on Oct. 27. The company had planned to sell stock in a price range of 23 euros to 29 euros, offering as many as 15.7 million shares including 11.5 million in new stock.
Three trading days before the Nov. 3 closing of the offer period, demand will at least match the stock on offer within the new price range, according to a term sheet distributed after the Friday announcement. Hapag-Lloyd still expects to start trading on Nov. 6, according to the document.
Copenhagen-based Maersk, citing a deteriorating market in the third quarter and October, lowered its full year profit forecast by 15 percent on Oct. 23, sending its shares to a two- year low. Hapag-Lloyd, the world’s No. 5 carrier in terms of fleet size, sought to calm investor fears on Oct. 26 by affirming its 2015 forecast in response. A $170 million quarterly loss posted on Thursday by No. 7 carrier China Shipping Container Lines added further pressure on Hapag-Lloyd’s stock sale.
Based on a book value of about 33.59 euros per Hapag-Lloyd share, derived from figures for the total stake as of June 30, Hanover-based TUI would incur a book loss exceeding 13 euros a share should the stock be priced at 20 euros.
Hapag-Lloyd’s plan to sell stock by the end of 2015 is part of a shareholder agreement from the company’s merger last year with the container-shipping operations of Valparaiso, Chile- based Cia. Sud Americana de Vapores SA.
–With assistance from Francesca Cinelli in Milan.
©2015 Bloomberg News
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