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.

The ‘new Hapag-Lloyd’ unveiled in merger agreement with UASC

The ‘new Hapag-Lloyd’ unveiled in merger agreement with UASC
Hapag-Lloyd and United Arab Shipping Company (UASC) have officially signed the agreement that will see the Dubai-based line’s operations merged into those of the German shipping giant.

Included is a plan for a $400m cash capital injection, by way of a rights issue, within six months of the proposed transaction.

The future equity funding of the mega marriage is among the key developments unveiled in a just released Business Combination Agreement (BCA) and separate Shareholders Support Agreement (SSA).

The combined entity, interestingly positioned as the “new Hapag-Lloyd”, will as expected remain a registered and stock listed company in Germany with its head office in Hamburg, subject to the necessary regulatory and contractual approvals.

Today’s media release, providing the first concrete details of the nuptials, highlighted UASC’s solid presence in “Middle Eastern markets and trades” and the new company’s “commitment to further strengthening this presence by establishing a fifth Hapag-Lloyd Regional Centre in Dubai.”

Interestingly, Qatar Holding LLC (QH) and The Public Investment Fund of the Kingdom of Saudi Arabia (PIF), the majority shareholders of UASC, are poised to become “key” shareholders in the Hapag-Lloyd holding – albeit minority on paper given QH is poised to take a 14% stake and PIF just 10%.

CSAV Germany Container Holding GmbH, HGV Hamburger Gesellschaft für Vermögens- und Beteiligungsmanagement mbH (City of Hamburg) and, logistics billionaire Klaus Michael Kühne’s Kühne Maritime GmbH will remain controlling shareholders of Hapag-Lloyd.

Under the terms of the SSA, “some” of the controlling shareholders of either side have committed to backstop the $400m cash capital increase by way of the proposed rights issue.

Following the integration, the new Hapag-Lloyd will rank among the five largest container shipping lines in the world, with 237 vessels and a total capacity of approximately 1.6m teu, an annual transport volume of 10m teu and a combined turnover of approximately $12bn.

The fleet of the combined company – including UASC´s six recently received 18,800 teu ships and 11 newly built 15,000 teu boxships (the last of which will be delivered soon) boasts an average age of 6.6 years and average size of 6,600 teu.

“This strategic merger makes a lot of sense for both carriers as we are able to combine UASC’s emerging global presence and young and highly efficient fleet with Hapag-Lloyd’s broad, diversified market coverage and strong customer base,” said Hapag-Lloyd ceo Rolf Habben Jansen, describing the merger as another “historic milestone” for the German company following the successful integration of CSAV last year.

“Furthermore it will give the new Hapag-Lloyd access to ultra large container vessels.”

The combined company will have a global, diversified trade portfolio, with leading product offerings in the major East-West and North-South trades.

“With this merger, we are embarking on an exciting new phase of UASC´s growth,” said Jorn Hinge, the president and ceo of UASC whose role in the merged company remains unclear. 

“Leveraging on UASC´s heritage in the Middle East as well as our recent growth in other markets, the combined company will provide customers with valuable expertise and very efficient service offerings in all major trade lanes and markets around the world”, he added.

The company will be the key player in the new “THE Alliance” – consisting of Hanjin, Hapag-Lloyd, K-Line, Mitsui OSK Lines, Nippon Yusen Kaisha (NYK) and Yang Ming. THE Alliance is scheduled to begin operation in April 2017 and will cover all East-West trade lanes including Asia-Middle East/Arabian Gulf and Red Sea.

“Hapag-Lloyd and UASC now take the next step to further consolidate and shape the liner shipping industry. The new transaction is strengthening not only our market position, but also our service portfolio. The merger will create annual net synergies of at least $400m and save a significant amount of capital expenditure for the company,” said Michael Behrendt, chairman of the Supervisory Board of Hapag-Lloyd.

Pending regulatory and contractual approvals, the merger is expected to be completed by the end of 2016. Until then, UASC and Hapag-Lloyd will continue to operate as stand-alone companies. Each company will also operate in its own alliance as currently structured until the end of March 2017, after which THE Alliance will commence operations.

It is the third major M&A transaction in container shipping in the last 12 months following CMA CGM’s buy out of Neptune Orient Lines (NOL), and the merger of Cosco Container Lines and China Shipping Container Lines (CSCL) as part of the wider merger of their parent companies. Hapag-Lloyd has been repeatedly linked to a possible merger with NOL over the years but no deal has come to fruition.