The two companies have entered into a sale and purchase agreement that will see NOL becoming a pure container line under the APL brand.
“This is a strategic move that will allow us to focus on improving our liner shipping business, while at the same time enabling APL Logistics to grow. The transaction will also strengthen our balance sheet and unlock value for our shareholders,” said Ng Yat Chung, president and ceo of NOL.
NOL said last August it was considering the sale of APL Logistics and has since undertaken a competitive bidding process. CJ Express Korea was among those that had shown an interest in APL Logistics.
The Singapore company said it would use the proceeds from the sale to strengthen its financial position and pay down debt. NOL will book a $900m net gain on the transaction as the APL Logistics carries a book value of $240m. By repaying debt NOL will reduce its gearing from 2.25 times to 1.08 times.
Ng told a media and analyst webcast that there had been longstanding external interest in APL Logistics. He added that today NOL did not have sufficent resources to grow both its liner and logistics businesses.
NOL deputy president Cedric Foo said KWE submitted the highest bid for APL Logistics. "Apart from Kintetsu we receieved many agressive bids for APL Logistics," Ng stated.
“We are very pleased to successfully enter into this transaction. Since 2013, we have laid out a strategy to strengthen our international presence especially in the US and Asia. This transaction fits right into our strategy,” said Satoshi Ishizaki, president and ceo of KWE.
KWE plans to keep APL Logistics headquarters in Singapore and run the company as a separate unit.
The move sees NOL selling the only profitable part of its business. APL Logistics reported a core EBIT of $67m in 2014, while APL liner reported a core EBIT loss of $143m.
Ng said the sale would, “allow APL to fully focus on turning around its container shipping business”.
"To stay in the liner shipping business you need to have a strong financial position. We believe we have the ingredients to return APL liner to profitability as soon as possible," he explained.
On the other scenario which NOL explored for APL Logistics which would have been an initial public offering (IPO) of the unit Ng said it would have helped provide funds grow the logistics business, however, "it would have less benefit to NOL's balance sheet".
The deal is subject to NOL shareholder and regulatory approval.
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