Cosco Shipping to acquire OOIL for $6.3bn

China Cosco Shipping Corporation Limited (Cosco Shipping) has offered to acquire Orient Overseas (International) Limited (OOIL) at a price of $6.3bn, confirming earlier rumours of the takeover deal that has been circulated since January this year.

Cosco Shipping is offering HKD78.67 for each OOIL share in respect of the total of 429,950,088 OOIL shares representing 68.7% of its issued share capital, with Cosco Shipping assuming 58.8% and Shanghai Port International Group (SIPG) taking the remaining 9.9% stake. The remaining 31.3% of shares will be validly tendered for acceptance by Cosco Shipping under the offer.

The cash offer made by China’s largest state-owned shipping conglomerate may eventually see it assume 90.1% in Hong Kong-listed OOIL, which owns the container line Orient Overseas Container Line (OOCL).

The offer price for each share represented a premium of approximately 55.2% over OOIL’s average closing price of HKD50.69 as quoted on the stock exchange for the 30 trading days immediately prior to the last trading date on 6 July 2017.

The joint offerors, Cosco Shipping and SIPG, said they intend to maintain the listing of OOIL shares on the Hong Kong Stock Exchange, but added that there is a possibility that the public will hold less than 25% of OOIL shares upon closing of the offer.

“Cosco Shipping Holdings believes this acquisition will enable both Cosco Shipping Lines and OOIL to realise synergies, enhance profitability and achieve sustainable growth in the long term,” said a joint statement from Cosco Shipping’s Shanghai and Hong Kong-listed Cosco Shipping Holdings and from OOIL.

“Upon completion of the offer, the combined Cosco Shipping Lines and OOIL will become one of the world’s leading container shipping companies with more than 400 vessels and capacity exceeding 2.9m teu including orderbook."

The marriage of Cosco Shipping Lines and OOCL will make them the third world's largest carrier with a combined 11.6% global market share with carrying capacity of around 2.42m teu, according to analyst Alphaliner. Cosco Shipping Lines is currently the fourth biggest with a 8.4% market share while OOCL is seventh with 3.2% market share.

They will overtake France's CMA CGM current third spot that saw it with 11.2% market share on around 2.36m teu capacity, behind Mediterranean Shipping Company (MSC) and Maersk Line are in second and first spots with 14.7% and 16.4% market share, respectively.

“In addition to this increase in scale, both parties will benefit from access to a combined and complementary global sales network and customer base, shipping network optimisation, as well as advanced IT systems, to further drive synergies and operational efficiency," the joint statement said.

The statement added that the offerors shall retain the existing compensation and benefit system at OOIL and not terminate any employee at OOIL for at least 24 months after the offer closing date.

Family-owned OOIL had repeatedly denied reports of Cosco Shipping’s takeover, with analyst Alphaliner weighing in just last week saying that the acquisition deal is ‘far from certain’.

Shares trading for Cosco Shipping Holdings had been halted since 17 May, with the Chinese group saying it was planning for certain material matters that constitute material asset restructuring.

Posted 10 July 2017
Lee Hong Liang

Asia Correspondent