NOL: No decision yet about possible sale

Neptune Orient Line, the parent company of ocean carrier APL, said it remains focused on its core liner business.    Neptune Orient Line, the parent company of the ocean carrier APL, on Sunday responded to reports that it might be sold by its largest shareholder, the Singapore government’s investment company Temasek.
   NOL said in a statement it “has not made any decision with respect to, and has not entered into any agreement for, a potential sale of the Company and there is no assurance that any agreement for the sale of the Company will be entered into. Shareholders of the Company and investors are therefore advised to exercise caution when dealing in their shares and other securities.”
   The company said it remains “focused on returning its core liner business to sustainable growth and profitability” and noted it has “invested in 32 new and modern ships, continued to streamline its costs and, after the sale of APL Logistics, has a much stronger balance sheet.”
   But it added it “has a duty to consider its options to maximize shareholder value as part of its conduct of normal business.”
   In addition to the reports that NOL might be for sale, there were also reports last week that German container carrier Hapag-Lloyd has engaged investment bankers to advise it on an initial public offering. The company indicated in a May 13 presentation to investment analysts that it was planning an IPO later this year, but the timing of the announcement has led to speculation about a possible combination of the two companies.
   Ronald Widdows, the former chief executive officer of NOL, said in an interview last week with American Shipper that he had no knowledge of potential sale or combination of NOL with another company.
   “I don’t know and I think it is really important until there is some statement made by the company or Temasek — the people who are material to the event — then the rest of it is speculation,” said Widdows.
   He said that over the past decade there has been interest in combining a number of container carriers. When Widdows led NOL, he tried to acquire Hapag-Lloyd, and just in the past year there have been talks about a possible merger by Hapag-Lloyd and Hamburg-Sud.
   Earlier this year, there were media reports about a possible combination of Hong Kong-based OOCL and NOL, but in April, C.C. Tung, the chairman of Orient Overseas International Ltd., told the Singapore Business Times a merger of the two companies was “unlikely.”
   Tung explained that since OOCL and NOL are already working together as part of the G6 shipping alliance, some of the benefits of a merger had already been achieved. But he said mergers of companies within an alliance were more likely than pairings of companies across alliances.
   “Outside G6, less chance. Within G6 we know each other,” he reportedly told the newspaper.
   Esben Christensen, a director in the global maritime practice of the consultants AlixPartners, agreed, “It’s hard enough already to integrate two large companies with complex networks, but if those two companies are in different alliances that is another level of competition.”
   Christensen said that while some synergies from combining companies are achieved through alliances, there are other benefits that could be captured through an actual merger of two liner companies through reduction in selling, general and administrative expenses and scale benefit around procurement and managing inland networks. But he noted the magnitude of those gains will depend, in part, “on how complementary or overlapping the networks are.”
   In addition to the Hapag-Lloyd, NOL, and OOCL, members members of the G6 include the Japanese carriers NYK and MOL as well has South Korea’s Hyundai Merchant Marine.
   “In general I think there’s been an appetite or an interest in merging container liner companies,” said Widdows, “but for a variety of reasons these things have not happened.”
   “The industry has changed a bit, scale is clearly a significant differentiator today, so companies that are of smaller scale obviously looking at ways to improve their cost competitiveness and that requires scale. But there’s few opportunities to do anything like that.
   “That there’s the potential interest in doing something like this is not a surprise but again, nothing that has come directly from the company or the majority owner as far as I know. It may not even be real, I don’t know.”
   Widdows said APL market position and brand equity in both the U.S. trade and intra-Asia market — both in East Asia and the longer intra-Asia trades to Indian subcontinent and Arabian Gulf, could be attractive to a carrier seeking diversification or growth in those markets. Other carriers with strengths in the transpacific and intra-Asia trades might also find NOL attractive as a way of building market share.