Seatrade Maritime is part of the Informa Markets Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

OOIL the 'perfect bride', but pressure to sell diminishing: Drewry

OOIL the 'perfect bride', but pressure to sell diminishing: Drewry
Orient Overseas International Ltd (OOIL), parent of Orient Overseas Container Line (OOCL) would make the perfect bride for another M&A deal in boxshipping according to Drewry but a hefty premium could put off buyers.

Speculation that OOCL could be up for sale helped push up OOIL’s share price by 20% at the start of the year.

Following the slew M&A transactions last year and the collapse of Hanjin Shipping, OOCL is one of the last mid-sized container lines left with around a 3% share of the global market.

“Such a move is not a shock following the sudden rise in container M&A activity of last year and OOIL/OOCL has long been considered one of the more attractive targets available. In a recent research paper Drewry Financial Research Services identified why OOIL would make the perfect bride for any potential suitor,” Drewry said in a report.

Drewry noted that while OOCL was “no minnow” it was drifting down the rankings with the next line above it once all the consolidation has played out, Evergreen, would be nearly twice its size. “With such a long distance to play catch up, and the heavy investment required to do so, it could well be that OOIL’s management decide that now is the right time to cash in,” it said.

Drewry said that what would make OOCL attractive was its long established reputation in the market and its track record of profitability even in tough markets.

However, with improving markets OOCL could prove an expensive proposition for potential suitors. The company has a market cap of around $2.9bn and adding net debt of $1.9bn giving an enterprise value of around $4.8bn.

“OOIL would be a fine acquisition for any carrier with deep enough pockets. The pressure to sell is diminishing as the container market improves, so for the company to be tempted it will take a much higher premium over the current valuation,” Drewry concluded.