Just weeks after HAPAG-LLOYD merged with UASC to create the 5th largest carrier, COSCO will become the 3rd largest global carrier with its offer to acquire OOCL.
The COSCO/OOCL deal and other recent mergers and acquisitions, combined with new ship deliveries, will give the top seven ocean carriers 75% of the world’s container ship fleet, a figure that has doubled in just over a decade, which is why analysts are highlighting possible cartel.
The COSCO bid, which has been made in conjunction with Shanghai International Port Group, is dependent upon pre-conditions, regulatory approvals and approval from COSCO Shipping Holdings shareholders.
The controlling shareholder, who currently holds 68.7% of OOCL, has irrevocably undertaken to accept the offer of HK$78.67 ($10.06) in cash per share represents a premium of about 30% on OOCL’s Friday closing price and values the company at around $6.3bn.
At the time of writing OOCL shares were 8.4% below the value of the joint offer put forward by Cosco and Shanghai International Port Group (SIPG), which means investors do not think a counter bid – let alone a bidding war – is at all likely.
But it also might signal that traders are wary of certain risks surrounding the closure of the deal, and expect it to encounter some resistance before it is carried over the finishing line.
This latest acquisition is one of the largest in a series of major container shipping events including CMA CGM’s $2.4bn acquisition of NOL in 2016; the merger in 2016 of Cosco and China Shipping; the 2016 bankruptcy of Hanjin Shipping; Maersk’s $4bn acquisition of Hamburg Süd; the announced ONE merger of Japanese lines and the merger Hapag-Lloyd and UASC.
COSCO has pledged to keep the OOCL brand and Hong Kong headquarters.
The combined COSCO/OOCL will operate more than 400 vessels over a much expanded network, with capacity exceeding 2.9 million TEUs including order-book.
Combining COSCO’s container fleet with that of OOCL will see the merged carrier leapfrog CMA CGM with a market share of 11.5% for a total capacity of 2.42m teu, together with an orderbook of 640,000 teu.
Both companies are members of the Ocean Alliance and will continue to work together under this framework, though analysts believe that the merger will change the balance of power within the Ocean Alliance, where CMA CGM is currently the largest member.
Only three global carriers remain outside of the new group of six mega carriers; Evergreen, Yang Ming and HMM.
While they consider their longer term options in the face of the size advantages held by the six super carriers, many analysts believe that COSCO may turn their attention on these small carriers, to stop the Europeans moving into their back-yard.
But with the pool of potential takeover candidates so depleted, any more mergers could face regulatory hurdles, especially if the Global Shipping Council and other shippers bodies continue to raise concerns over the potential for cartel activity.