HNA, Bravia agree to acquire GE SeaCo

HNA, Bravia agree to acquire GE SeaCo    HNA Group Co. of China and Bravia Capital of Hong Kong said Monday they have agreed to acquire GE SeaCo, the world's fifth-largest marine container leasing company, for about $1.05 billion from General Electric and SeaCo.
   GE SeaCo owns and manages more than 870,000 TEUs.
   Adam Tan, executive director of HNA, said the deal fits into his company’s plans “to quickly grow our logistics and transport business.
   'Our company currently owns and operates China's fourth-largest port, a fleet of 30 containerships and a containership finance arm. GE SeaCo fills an important gap critical to our ongoing growth,' he said.
   HNA is parent company of Grand China Shipping, a container carrier that entered the transpacific market earlier this year. The HNA conglomerate is also the parent of Hainan Airlines and a number of other regional carriers. It also has interests in airports, hotel, tourism, retailing, finance and catering.
   Because few new container boxes have been ordered in recent years, container leasing companies have had strong utilization of their box fleets and higher earnings during the past year. For example, last week TAL International, the fourth-largest container lessor, reported second quarter profit of $23.2 million, more than four times the $4.7 million it earned in the same 2010 period.
   “This is an exciting acquisition that comes at a time when the global growth in marine container demand continues to grow on a long-term basis,” said Bharat Bhis', chief executive officer of Bravia Capital.
   Bravia has made five co-investments with HNA outside of China. These include Dutch heavy lift shipping company Fairstar Heavy Transport; Norwegian Sinoceanic Shipping, a containership finance company that owns three containerships and has another four on order; and ACT Airlines, a Turkish cargo carrier.
   Bhis' said Bravia and HNA are long-term strategic investors in the container-leasing business and plan to make other acquisitions to grow GE SeaCo. He said going forward GE SeaCo might look at chassis leasing and eventually becoming a public company.
   The container-leasing business is “a function of world GDP growth and if the world goes into recession, the business will suffer. If the world does not go into a recession, and continues to grow, especially the Asian countries then they are going need the boxes,” he said.
   Bhis' said the outlook for container shipping was “not good. That’s because the charter rates that have been agreed to by the container-shipping companies are way higher than what the market is giving them. But container leasing is very good, we have a 99 percent container utilization rate at GE SeaCo. I don’t think that will continue indefinitely, but at the moment, that is what it is.” If utilization dropped to the mid 90s or even 85 percent, that would “not be the end of the world,” he added.
   One of the attractive features of container business, he said, is that the lead time for ordering boxes is short, typically only about three months compared to years for containerships. So if the market declines, leasing companies are not stuck with huge, unused inventories.
   “You can easily switch off your orders and switch them on again,” Bhis' explained.
   David G. Amble, a GE executive, will continue as CEO for GE SeaCo after the sale. ' Chris Dupin