Monday, July 10, 2017

COSCO and OOCL Container Shipping Lines Plan to Amalgamate in Latest Freight Carrier Consolidation

Chinese Interests Look for Approval from Shareholders and Regulators
Shipping News Feature
CHINA – WORLDWIDE – Orient Overseas (International) Limited (OOIL), the Hong Kong headquartered holding company which owns Orient Overseas Container Line (OOCL) will become the property of state owned, Shanghai based, COSCO Shipping if shareholders and regulators agree. The combined COSCO Shipping Line, a subsidiary of COSCO Shipping Holdings, and OOIL will operate more than 400 vessels over a much expanded network, with capacity exceeding 2.9 million TEUs including vessels currently on the order book.

The bid has emanated from both COSCO and the Shanghai International Port Group (SIPG), itself owned 61.7% by the Shanghai government. This combination meshes nicely as OOCL affiliates own or operate various worldwide container terminals including in the US and Taiwan. Both COSCO and OOCL are members of the OCEAN Alliance together with Evergreen and CMA CGM and certainly the new combination would give a bigger, balanced spread of port calls.

OOIL saw an 86% drop in net profits two years ago as overcapacity hit players across the container shipping market and since then we have seen a host of acquisitions, bankruptcies and container alliances and these last have not been without criticism. China COSCO Shipping is the fourth largest container line by both TEU capacity and size of fleet whilst OOCL ranks 7th or 9th dependent on which figures you trust. What is certain is that, as a combined entity, the carrying capacity of the two companies would run CMA CGM close as the third largest box carrier in the world.

The board of directors of OOIL has established an Independent Board Committee to advise the group's shareholders in connection with the offer. An independent financial adviser will also be appointed and of course, if acceptable terms are met, any new arrangements will need to be approved by the world’s antitrust regulators. SIPG and COSCO say if the deal goes through they will retain OOIL’s global headquarters in Hong Kong and maintain staff numbers and compensation levels. Mr Andy Tung, Executive Director of OOIL, commented:

“We are proud of the business we have built and the people who have been building it. This decision has been carefully considered and we believe it helps ensure the future success of OOIL. We are confident that COSCO Shipping Holdings is the right partner for us.”

On completion of the acquisition and, assuming all OOIL shareholders tender their shares, COSCO Shipping Holdings will hold 90.1%, while SIPG will hold 9.9% of OOIL. It is less than 18 months of course since the COSCO Group itself merged with China Shipping, and Mr Wan Min, Chairman of COSCO Shipping Holdings, said:

“We respect OOIL’s management team and its expertise, not to mention its people, brand and culture. Our company remains committed to enhancing Hong Kong as an international shipping centre. Following completion, we will continue to invest and strengthen our industry leadership, providing a more extensive platform for the employees of OOIL to excel.”