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Hapag-Lloyd and CSAV ink merger MOU

Hapag-Lloyd and CSAV ink merger MOU
Compania Sud Americana de Vapores (CSAV) announced it has signed a non-binding Memorandum of Understanding (MOU) with Hapag-Lloyd that sets out the basis to combine the container shipping business of both shipping companies. Under the terms of the agreement CSAV would become the largest shareholder in Hapag-Lloyd with a 34% stake.

The new company would become the fourth largest container line operator with a combined carrying capacity of about 1m teu, transporting cargoes volumes of nearly 7.5m teu and combined sales of nearly $12bn a year,” CSAV said in a letter dated 22 January to Chile’s Superintendence of Securities and Insurance and signed by CSAV Ceo Oscar Hasbun.  “The expected synergies from this business combination would be about $300m annually,” said the letter.

Both parties have agreed to improve efficiency and renew their fleet and foresee two capital increases in the combined entity of EUR700m  within the twelve months of the transaction. The first capital increase of EUR370m would see CSAV subscribe EUR259m of shares within 100 days following the execution of the transaction, which would give CSAV a stake of 34% of Hapag-Lloyd. “ The second capital increase of EUR370m is expected to be part of the listing of Hapag Lloyd in the stock exchange within the term of one year following the transaction.”

The transaction is subject to due diligence by both parties another approval of the transaction by all the component corporate bodies of each party, by government authorities and eventual consents and authorisations of third parties.

Both parties consider that these conditions should be accomplished and the probable closing date within six months.

“Notwithstanding the foregoing, It is expressly excluded from the transaction the shipping business of solid bulk, of liquid bulk, of non-containerised reefer and car carrier,” said the letter.

“CSAV will evaluate to call an extraordinary shareholder meeting to approve capital increase to raise funds to complete the financing of the acquisition of seven 9,300 teu-container vessels under construction in an amount of $200m to concur to the capital increase of the EUR259m  mentioned and obtain other resources necessary to close the transaction,” it said. 

Hapag-Lloyd and CSAV announced they were in merger talks in early December 2013 and recently speculation has been rife that a deal was imminent.

In the past Hapag-Lloyd has held failed merger negotiations with Hamburg Sud and Neptune Orient Lines.

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