COSCO-OOCL deal gets green light

In 11th-hour decision, Chinese antitrust agency allows deal that will create third-largest container carrier.    COSCO Shipping Holdings said Friday that antitrust authorities in China have agreed to allow its acquisition of the parent company of Orient Overseas Container Line (OOCL) to move forward, which will make the combined companies the world’s third-largest container carrier.
   COSCO’s partner in the acquisition is a subsidiary of Shanghai International Port Group, which will take a 9.9 percent stake in OOCL’s parent, Orient Overseas (International) Ltd. (OOIL).
    In a brief announcement submitted to the Hong Kong Stock Exchange, COSCO said on Friday that China’s Anti-Monopoly Bureau of the State Administration for Market Regulation had chosen not to prohibit its offer for OOIL. The decision by Chinese officials came one day before the June 30 deadline set forth in the original announcement of the proposed acquisition.
   Previously the companies said they had received approval from European and U.S. competition authorities, and it was unclear why Chinese officials had waited till the 11th hour to make their ruling.
   Their approval was one of the preconditions the companies said had to be met before the deal could move forward when it was announced nearly a year ago on July 7, 2017.
   When announced, the deal was valued at about 49.2 billion Hong Kong dollars (US $6.3 billion).
    Friday’s announcement said a “composite document” giving the full terms and details of the offer will be issued within seven days.
    With a combined fleet of 466 owned and chartered ships with 2,725,183-TEU capacity, the combined companies will supplant CMA CGM as third largest in the world, smaller only than Maersk Line and Mediterranean Shipping Co.
    According to Alphaliner, COSCO’s 366 owned and chartered ships with capacity of 2,036,206 TEUs make it the fourth largest today. COSCO also has 19 ships on order with 334,683-TEU capacity. OOCL, currently the eighth-largest container carrier capacity, has 100 ships with capacity of 688,977 TEUs and no ships on order.
    When the deal was announced last year, COSCO said it planned to keep OOIL branding, retain its stock exchange listing and headquarters functions and presence in Hong Kong. In a filing with the Federal Maritime Commission, COSCO explained it will end up owning between 58.5 percent and 90.1 percent of OOIL, but that in order to maintain OOIL’s separate listing on the Hong Kong Stock Exchange, 25 percent of the stock must be held by the public, so it may be required to sell stock “to maintain the requisite public ownership.”
   The announcement was silent on the future of OOIL’s Long Beach Container Terminal, one of the most automated container terminals in the United States. The acquisition of the terminal is reportedly being reviewed by the U.S. Committee on Foreign Investment in the United States.
    A report in the Wall Street Journal earlier this month said COSCO has offered to put the terminal into a “U.S.-run trust to allay U.S. national security concerns about Chinese ownership of the facility.”