NOL eyeing M&A activity, no comment on Hapag-Lloyd rumors
NOL profit jumps after strong liner performance
NOL Group President and Chief Executive Officer Thomas Held said his Singapore-based company is prepared to make a move for another major ocean carrier if the right opportunity arises.
Speaking Tuesday during a webcast of the company’s 2007 result, Held said: “We do expect container shipping industry consolidation to continue. We are prepared to take an active role as a consolidator if this creates long-term value for our shareholders and fits in with our overall strategy.”
His comments added fuel to recent speculation that merger talks between its container unit APL and Germany’s Hapag-Lloyd, owned by tourism and shipping conglomerate TUI AG, are ongoing.
However, Held refused to be drawn on the issue. “It's our policy not to comment on market speculation and we never talk about individual candidates,” he said.
The latest round of speculation involving Hapag-Lloyd, the world’s fourth-largest container operator, was sparked by reported sightings of TUI CEO Michael Frenzel in Singapore, apparently to discuss a possible merger deal involving Hapag-Lloyd and APL, the eighth-largest liner operator.
Frenzel has come under severe pressure from shareholders, most notable U.S. activist investor Guy Wyser-Pratte, unhappy with the company's results since acquiring CP Ships in late 2005, and has resisted all previous calls to divest Hapag-Lloyd. Past speculation has centered on Denmark’s A.P. Moller – Maersk Group making a bid for the Hamburg carrier.
He recently put forward a plan to merge Hapag-Lloyd with its holding company that the supervisory board has agreed to examine when it meets in mid-March. Such a move would make the shipping unit virtually immune from any takeover approach, as it would require potential suitors to stump up for the entire group.
Wyser-Pratte, who bought a 1 percent share of TUI last September, told Shippers’ NewsWire that Frenzel’s plan is opposed by both shareholders and members of the supervisory board.
“The merger of Hapag-Lloyd and TUI will never happen,” Wyser-Pratte said. “The board is now opposed and Frenzel has overstepped his boundaries. It is clearly a move that destroys value in the company and there's no way he can get around that. He's really created himself a problem by even proposing such a thing.”
Looking again at the potential tie-in with APL, talks are said to be at an advanced stage with the German group hiring Deutsche Bank and Greenhill to assist a deal, while NOL has reportedly employed JP Morgan's services.
One proposed outcome would see NOL's majority owner, Singapore government-controlled investment company Temasek Holdings, put its 68 percent share of NOL into Hapag-Lloyd in return for about 23 percent of TUI.
TUI head Frenzel is understood to want to place Held, a German national, as head of a combined Hapag-Lloyd/APL entity that would narrowly leapfrog CMA CGM for third place in the global rankings behind Maersk Line and Mediterranean Shipping Co.
A marriage between the two lines would be appear to be a good fit as their regional market shares are complimentary. For example, APL would boost its share of the Asia/Europe and transatlantic markets, while Hapag-Lloyd would increase its share in the transpacific and Intra-Asia trades.
Philip Damas at Drewry Shipping Consultants agrees the two carriers make a good match. “I think it makes sense for the two carriers to merge, more than other combinations. I think it's a fact that the acquisition of CP Ships has not been very successful so far, so the onus is on TUI to deliver on its promises.”
One obvious stumbling block to a deal being concluded is the potential operational chaos that would be inflicted on the two carrier's global alliance partners. Hapag-Lloyd is a member of the Grand Alliance alongside NYK, OOCL and MISC (only on Asia/Europe services), while APL partners with MOL and Hyundai Merchant Marine in the New World Alliance.
Also, it can't be ruled out that any of these partners or another container shipping heavyweight wouldn't immediately opt to enter the fray if it emerges there is substance behind the rumors. ' Simon Heaney