|
CHILEAN
shipping firm Compania Sud Americana de
Vapores (CSAV) shareholders have voted 84.5
per cent to merge with German shipping line
Hapag-Lloyd (HL), creating the world𠏋 fourth
largest container carrier and the first
amalgamation in shipping industry since
2006 as well.
CSAV
general manager Oscar Hasbun said in a company
statement: "Once again our investors
have shown their support for the project
that we are promoting, and their confidence
in the operation we are undertaking.
"This
is reflected in the fact less than one per
cent of shareholders voted against the transaction.
"We
expect that on April 20 their withdrawal
rights will be confirmed for less than five
per cent of shares, and that therefore,
the negotiation with Hapag-Lloyd will be
able to take its course.?
Should
the deal be accepted, a Bloomberg report
suggests that a binding agreement will be
signed in the following 40 days, with the
merger likely to be completed by the end
of the year.
In
January, both Hapag-Lloyd and CSAV signed
a non-binding memorandum of understanding
establishing that, if the merger will be
completed, CSAV will receive 30 per cent
of the combined company.
There
will be an initial capital raising of EUR370
million (US$506 million), to which CSAV
must subscribe EUR259 million within 100
days of conclusion of the transaction.
A
further EUR370 million will be raised within
one year as part of a listing of Hapag-Lloyd,
a declared aim of TUI, holder of 22 per
cent of the company.
The
new HL-CSAV would have a combined carrying
capacity of one million TEU, transported
volume of 7.5 million TEU per year and combined
sales of $12 billion annually on cost savings
of $300 million a year, according to CSAV.
Taking
the HL-CSAV merger as an example, the attraction
of consolidation lies in the economies of
scale that it offers. And even if we are
not talking about full-scale consolidation
(one company buying out another), lines
can also achieve some scale benefits through
less dramatic forms of consolidation, such
as vessel sharing agreements and other such
partnerships.
With
greater economies of scale owners can reduce
their respective cost burdens through the
sharing of bunker costs and the non-duplication
of service routes.
By
cutting costs they are also able to potentially
expand market share and bolster their balance
sheets; something that would greatly appeal
to many a shipping company.
But
is liner consolidation easier said than
done?
History
has shown us that the results are not always
positive. AP Moller Maersk𠏋 decision to
acquire P&O Nedlloyd in 2005 proved
to be rather troublesome for the world𠏋
number one shipping company.
Hapag-Lloyd𠏋
takeover of CP Ships was even more problematic
and almost ruined the German carrier.
Clearly
there are benefits to acquisitions, as CMA
CGM can attest to with their numerous dealings
over the years that have proven very fruitful.
But there are also risks and difficulties
that need to be overcome as we have seen
with the Maersk and Hapag-Lloyd examples.
As
a matter of fact the closest thing to any
consolidation is the kind of "quasi
consolidation the [world] last saw in December
2011", BIMCO senior analyst, Peter
Sands, told The Container Shipping Manager,
referring to the numerous agreements made
between lines to operate joint services.
Mr
Sands argues that this is the only form
of consolidation we can expect to see going
forward. As for any full scale consolidation
efforts the analyst believes such a scenario
is just 忛ot in the cards?
So
don㦙 expect any Hapag-Lloyd-like takeovers
or CP Ships, or another Maersk buyout of
a player like P&O Nedlloyd.
Besides
the prospective HL-CSAV merger, we may not
see any dramatic shifts among the top 20
lines in the market, but we may very likely
see some of the smaller players being gobbled
up going forward. The failure of talks about
the merger between Germany's top two container
carriers - Hapag-Lloyd and Hamburg Sud in
2013 is a good example.
But
from our conversations with some liner executives,
there is still the possibility of larger
lines purchasing small, niche operators
if a good opportunity arises.
Given
the soft recovery in the global economy
and slackness in the container shipping
sector, financial commitments of the magnitude
needed to acquire another business will
often prove too much of a gamble for any
liner to consider.
Until
it becomes clearer as to how long the current
market conditions will persist, odds are
that consolidation will be limited to the
𢖾uasi consolidation? highlighted by BIMCO𠏋
Mr Sands.
The
container shipping industry faces another
challenging year in 2014, and while speculation
over whether the time is ripe for consolidation
or not, the reality is that topics such
as oversupply, capacity management, network
rationalisation, ailing demand and downward
pressure on freight rates will feature far
more prominently in the end.
|
