Report: UASC considering sale of chemical tanker unit

United Arab Shipping Co. could sell off its UACC division, a tanker business for oil and petrochemicals, for more than $600 million as part of its plans to merge with German ocean carrier Hapag-Lloyd, according to a report from Bloomberg news service.    United Arab Shipping Co. is considering selling off its liquid chemical transport unit as part of its proposed merger with German ocean carrier Hapag-Lloyd AG, according to a report from Bloomberg news service.
   UASC and Hapag-Lloyd shareholders agreed in principle to a combination of their respective container shipping businesses just a few weeks ago.
   Under the proposed agreement, UASC’s shareholders – comprised of Qatar, Saudi Arabia, Kuwait, Iraq, the United Arab Emirates and Bahrain – would own 28 percent of a new company, while the existing shareholders of Hapag-Lloyd would own 72 percent of the combined company.
   Although it has yet to be finalized, merging the two lines would create the fifth largest container carrier worldwide, with a combined fleet of 1.59 million TEUs, according to ocean carrier schedule and capacity database BlueWater Reporting.
   Bloomberg reported earlier this week that UASC’s United Arab Chemical Carriers Ltd. division, a tanker business specializing in oil and petrochemicals, could be up for sale as a stipulation of the agreement. The report cited “people familiar with the matter,” who said UACC could be valued at more than $600 million.
   The Dubai-based shipping conglomerate has reportedly tapped Bank of America Corp. to help find potential buyers for its holding in UACC. UASC owned 95 percent of UACC as of 2012, according to the company’s most recent available financial statements. Sources indicated UASC might also be considering divesting its air cargo business as part of the Hapag-Lloyd deal.
   Founded in 2007, UACC owns a fleet of two dozen tanker vessels, which recently have more profitable than containership assets as they have been used to store cheap crude oil.
   As with any M&A activity, there are several scenarios that could play out here, but here are a few possibilities.
   The six Middle Eastern countries that own UASC could essentially split the company into two separate divisions, one being the container business and the other its tanker business. In this scenario, UASC would become a major stockholder in Hapag-Lloyd after its operations were merged with with the German line. This would be most analogous to Hapag-Lloyd’s 2014 merger with Chilean carrier CSAV, which is currently the Hapag-Lloyd’s largest shareholder with a 31.4 percent equity stake. CSAV continue to separately operate roll-on/roll-off, liquid bulk, and reefer shipping business as well as freight forwarding and logistics services.
   Another possibility would be for UASC’s shareholders to sell the entire company, tanker business included, to Hapag-Lloyd, which in turn could either run it as a separate unit or sell it themselves.
   A third option would be for the owners to sell just the container business to Hapag-Lloyd, and continue to own and operate UACC as an unaffiliated entity.
   Reached for comment, a spokesperson for Hapag-Llloyd said, “As you are aware, after having received the relevant approvals by HLAG board and UASC shareholders, the companies are currently finalizing the documents for signing. As soon as we would sign a BCA, we would also be in a position to talk about strategic rational, deal structure, capital implications etc of the proposed transaction. However, until then we are unfortunately not in a position to discuss these topics yet (since nothing binding has been signed yet).”