France’s CMA CGM is in exclusive talks to buy Singapore’s Neptune Orient Lines, in what would be one of the biggest acquisitions in the shipping container industry in years.
NOL, whose ships operate under the APL brand, said on Saturday that its biggest shareholder — part of Singapore’s Temasek state-run investment fund — had granted CMA CGM exclusivity “with respect to a potential acquisition of NOL by way of pre-conditional voluntary general offer”. CMA confirmed NOL’s statement on Sunday.
If consummated, the deal would bring the French line close in size to Mediterranean Shipping Company, the market number two.
The announcements follow NOL’s previous disclosure on November 7 that it was in talks with both CMA CGM and Denmark’s AP Møller-Maersk — owner of Maersk Line, operator of the world’s biggest container ship fleet — over a potential sale.
Maersk declined to comment on why it had pulled out of contention to take NOL over.
There has been a consensus for many years that container shipping — which is critical to the world economy, carrying manufactured and semi-finished goods worldwide — needed to become more consolidated. However, the mix of family control of many big companies and government involvement has prevented deals and pushed lines towards looser alliances.
CMA CGM — which is private and controlled by the Marseilles-based founding Saadé family — said that if the discussions led to an agreement the combination would contribute to the consolidation of container shipping at a time when scale was more critical than ever.
“It would further reinforce CMA CGM as a global force in container shipping, leveraging the strong geographic and operational complementarity of both groups,” the company said.
According to Alphaliner, the Paris-based container shipping information service, APL controls 2.7 per cent of the world container shipping fleet, while CMA CGM operates 8.8 per cent. The combined company would be far closer than at present to Mediterranean Shipping Company’s 13.4 per cent of the world fleet. A merger would also help CMA CGM’s Ocean 3 alliance — which includes China Shipping and United Arab Shipping, the market numbers seven and 15 — to compete more effectively. The 2M alliance of Maersk and Mediterranean Shipping Company is the most powerful industry alliance.
NOL — which took over the US’s APL in 1997 — is stronger than CMA CGM in routes between Asia and North America. Friday’s closing price in Singapore values NOL at S$2.91bn ($2.06bn).
Container shipping lines have been struggling to cope with a mixture of excess capacity resulting from shipping lines’ ordering of vast, more efficient new vessels and a sudden worldwide slowing of demand. NOL reported a $95.6m net loss for the third quarter, on revenue down 28 per cent to $1.21bn.
A sale would mark a significant change of fortunes for NOL, which in 2008 sought to buy Hapag-Lloyd, Germany’s biggest container line, but was rebuffed by official concerns about the loss of what was seen as a key German asset. Hapag-Lloyd last year bought Chile’s CSAV, and now is the world’s fifth-biggest container line.