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Maersk buys Hamburg Sud as consolidation shipping industry continues

The Danish conglomerate expects the deal to close by the end of 2017.

Denmark’s A.P. Moeller-Maersk A/S on Thursday, Dec. 1, bought the world’s seventh-largest container shipping group Hamburg Sud from the Oetker Group, cementing its No. 1 standing. The deal is expected to enable the expanded group to cut shipping costs for customers.

The move comes after the Danish conglomerate on Sept. 22 announced the company will be divided into divisions – transports and logistics; and energy – with the latter potentially spun off or sold.

Maersk Line, the world’s largest container shipper, in September that it would grow its market share organically or through acquisitions.

The purchase will give Maersk access to Hamburg Sud’s 130 container vessels and to its North Sea shipping routes. In 2015, Hamburg Sud has a turnover of $6.7 billion of which $6.2 billion stems from container line activities. It operates under the Hamburg Sud, CCNI (based in Chile) and Alianca (based in Brazil).

The deal is subject to due diligence, regulatory approvals and is expected to close by the end of 2017. Financial terms of the deal were not disclosed but analysts from Jefferies International Ltd. estimated it could be between $3 billion and $5 billion.

Hamburg Sud and Alianca will continue to operate as separate brands.

“Our combined network will provide exciting opportunities to develop new products and exploit operational synergies. Hamburg Süd and Maersk Line customers will benefit from more choice and better products,” Maersk CEO Søren Skou said in a statement.

The container shipping industry has seen dramatic changes over the past couple of months. Most recently South Korea’s Hanjin Shipping Co. Ltd filed for bankruptcy in August, stranding ships at sea.

In June, HapagLloyd AG gained shareholder approval to merge with Dubai-based United Arab Shipping Co. The deal will create the world’s No. 5 container shipping operator and a company reportedly worth $9 billion.

With the acquisition, Maersk Line will have container capacity of around 3.8 million TEU (twenty-foot equivalent) from 3.1 million TEU and an 18.6% from 15.7% global capacity share. The combined fleet will consist of 741 container vessels with an average age of 8.7 years down from Maersk’s 9.2 years.

Maersk expects to provide further details about the deal in the second quarter of 2017.

“The acquisition of Hamburg Süd would add 20% to capacity and consolidate Maersk Line’s leading position, with an increased market share of 18.6% of the world fleet, and add 26% to revenues,” Jefferies analysts said in a note to clients on Thursday. 

The Danish conglomerate clearly focused its efforts on the transport and logistics division when it decided to separate, saying the main purpose of Moeller Maersk going forward will be to deliver “best in class” transportation and logistics services. The division will consist of Maersk Line, APM Terminals, Damco, Svitzer and Maersk Container Industry and be set up as one company with multiple brands.

“Commercial as well as cost synergies will be unlocked by better utilization of existing assets and by the development of new digital solutions. We expect to deliver revenue growth, cost efficiency and margin improvements. The estimated synergies are expected to generate up to two percentage points ROIC improvement over a period of three years. No material synergies are expected in 2016,” the company said.

The board, however, seemed less optimistic about the oil business. The company is looking at different solutions for the company including separation of entities individually or in combination with the Maersk group in the form of joint-ventures, mergers or listing.

The company said it was aiming to find a solution for the oil and oil-related business within 24 months.

Compliments of The Deal – a member of the EACCNY