In a bid to boost its trans-Pacific route presence, French shipping firm CMA CGM offered on Monday, Dec.7 to buy Singapore’s Neptune Orient Lines(NOL) for US$2.43 billion.
In a joint statement, the third largest container shipping firm in the world and NOL said Temasek, owner of almost 67 percent stake in the latter, accepted the offer and is poised to tender all shares. CMA CGM offered S$1.30 (US$0.93) a share in cash, which is 6 percent about NOL’s last closing stock price.
CMA CGM will provide the required cash offer to the remaining shareholders of NOL, which sold its logistics unit earlier this year to Japanese freight carrier Kintetsu World Express Inc for $1.2 billion.
NOL has been struggling amid bad times in the global shipping industry, posting losses in the last four years. State investor Temasek, for instance, shelled out S$2.80 (US$2) per share back in 2004 when it raised its stake from 29 to 68 percent at that time.
Rating agency Fitch explained in its report last week that consolidation becomes most viable at these times when smaller shipping companies are confronted by slower economic growth, overcapacity, and poor commodity prices.
"With few others having the resources or inclination, we suspect that this is not just the best offer for NOL stock but the only one," analysts from Credit Suisse wrote in a Monday report.
The deal is poised to create a combined firm with full-year $22 billion revenue and more trade lines to be up against Maersk Line. It is also the largest for the container shipping sector since Maersk’s acquisition of Royal P&O Nedlloyd NV in 2005 for $2.96 billion.
CMA CGM and Neptune Orient expect regulatory nod for the deal by mid-2016.
The companies said the move highlights Singapore’s strategic position in Asia as a maritime hub.
“The combined entity would reinforce Singapore’s leadership in the maritime and shipping sector as the city-state seeks to increase maritime services and transportation volumes, including committing more volumes through Singapore,” the release stated.
Following the acquisition, CMA CGM will also build a regional headquarters in Singapore.
Photo: Don O'Brien | Flickr