Maersk Line to Buy German Shipping Line Hamburg Süd in $4 Billion Deal
Deal would boost presence on North-South shipping routes
The MV Maersk Mc-Kinney Moller berths at a PSA International port terminal in Singapore. PHOTO: REUTERS
Maersk Line, the container shipping unit of Danish conglomerate A.P. Moller-Maersk A/S, agreed to buy German shipping line Hamburg Süd, boosting its presence on North-South shipping routes.
Maersk Line agreed to pay roughly $4 billion, according to people familiar with the discussions, making it one of the biggest deals for a container operator. The deal, which is subject to regulatory approvals around the world, is expected to be completed by the end of next year, and the final price is subject to the completion of due diligence.
“With the addition of Hamburg Süd we will become the leading player in trades in and out of Latin America,” Soren Skou, Maersk chief executive said in an interview.
Hamburg Süd has a 25% share of all shipments in and out of Brazil. The deal would boost Maersk Line’s share of global seaborne freight to 18.6% from 15.7%, according to maritime data provider Alphaliner.
Maersk shares closed 6.7% higher Thursday in Copenhagen.
Container ships move 95% of manufactured goods, from designer dresses and shoes to home appliances and heavy machinery, but plunging freight rates over the past two years have the industry fighting to maintain profitability in its longest down-cycle in decades. That has kicked off a rare round of consolidation in which the top players are trying to bulk up to obtain more pricing power when the industry recovers.
The Wall Street Journal reported this week that Maersk was looking to buy Hamburg Süd, which is owned by the Oetker Group, a family-owned German conglomerate involved in shipping, banking, food and beverages. The Oetker Group initially asked Maersk to pay around $5 billion.
Maersk’s Mr. Skou said the takeover will also boost business for APM Terminals, its port operations division, which has a substantial presence in the southern hemisphere.
Hamburg Süd, the world’s seventh largest operator, operates 130 container vessels with a capacity of 625,000 containers. It has 5,960 employees in more than 250 offices and reported sales of $6.73 billion in 2015.
The German company, which is largely debt-free, resisted takeover attempts for years. But with the difficult market conditions and no immediate prospects for a recovery in the industry, the Oetker family decided to exit from the shipping sector, according to the people familiar with the discussions.
“Giving up our engagement in shipping after an 80-year-long ownership in Hamburg Süd was not an easy decision for my family. We are very confident, though, to have chosen the best of all possible partners,” said August Oetker, the family’s patriarch.
Despite a flurry of consolidation in which France’s CMA CGM, the industry’s third-biggest player, bought Singapore’s Neptune Orient Lines, and Japan’s three largest shipping companies merged, the industry remains largely fragmented.
Dozens of small operators have been constantly undercutting one another on price, driving freight rates even lower and making it more difficult for the industry to cope with capacity that is an estimated 30% above demand.
The crisis claimed its first big name victim in August when Korea’s Hanjin Shipping Co. declared bankruptcy.
“Consolidation will continue,” Mr. Skou said, adding that over the next few years the top 20 global operators now “could be cut down to a handful.”
