CMA CGM’s APL Buy Would Set a Record in Container Shipping

The proposed acquisition of Singapore’s APL by the French shipping major CMA CGM would be the largest consolidation move in the history of the container shipping industry, based on the size of the fleet operated by the acquired company, according to Alphaliner.

The combination of APL’s vessels (0.54 Mteu) with ships of the CMA CGM Group (1.79 Mteu) would create a combined fleet of 2.33 Mteu with an 11.5% global capacity share, based on Alphaliner figures.

Neptune Orient Lines (NOL), the parent company of the ocean carrier APL, has confirmed that it entered into an exclusivity agreement with the French shipping line CMA CGM to negotiate a potential acquisition of NOL.

The agreement grants CMA CGM exclusivity until 7 December to complete a due diligence and negotiate a final offer for NOL. Lentor Investments, a wholly owned subsidiary of Temasek which holds a 39.5% stake in NOL, is part of the agreement with CMA CGM.

Temasek Holdings, the investment company owned by the Singapore Government, holds a further 27.5% interest in NOL that is not owned by Lentor.

According to Alphaliner, this suggests that Temasek could be planning to dispose only part of its 67.0% stake in NOL.

CMA CGM said that, should these discussions lead to an agreement, such a combination would contribute to the consolidation of the container shipping industry, at a time when scale is more critical than ever.

“Under Singapore stock market rules, CMA CGM could make a ‘voluntary general offer’ for all or part of NOL’s shares. The French buyer, however, would be required to make a mandatory offer for all of NOL’s shares as soon as its obtains more than 30% of the company’s voting rights,” Alphaliner said.

APL’s current operated fleet of 541,000 teu is larger than the 460,000 teu operated by P&O Nedlloyd in 2005, when the latter was acquired by Maersk.

However, APL has a current global capacity share of 2.6%, which is lower than P&O Nedlloyd’s capacity share of 5.5% in 2005. It is also below the 3.6% share held by Sea-Land in 1999, at the time of its acquisition by Maersk (excluding the US domestic fleet that was not part of the deal), Alphaliner said.

In addition, the CMA CGM-APL deal could also be dwarfed by the planned merger of COSCO and CSCL’s container shipping businesses, expected to be finalized in the coming months.

NOL also said that it was in preliminary discussions with Danish A.P. Moeller-Maersk A/S with respect to a potential acquisition.

However, the industry signals that the French giant may be a better fit for NOL. Namely, as explained by Drewry, CMA CGM is smaller than Maersk in the Transpacific and would benefit from access to APL’s large base of high-end textile and other time-sensitive product customers, as well as its profitable US government contracts linked to the use of US-flag vessels, both of which Maersk already has.

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