News

Cosco tables $6.3bn offer for Orient Overseas International

Source: Trade Winds News

July 9th 2017

Much-hyped merger becomes official with cash offer confirmed.

Cosco Shipping Holdings has tabled a $6.3bn bid for Orient Overseas International that will create the third largest container line in the world.

Cosco’s all cash offer could see it assume a 90.1% stake in its Hong Kong-listed rival, with Shanghai Port International Group taking the remaining stock.

The combination, about which there has been press speculation for several weeks, was confirmed in a joint statement on Sunday.

A deal would forge an industry giant with over 400 ships of a collective 2.9 million teu that sits behind only Maersk Line and Mediterranean Shipping Company in the global standings.

Andy Tung, chief executive officer of Orient Overseas, said in a statement today: “This decision has been carefully considered and we believe it helps ensure the future success of OOIL. We are confident that Cosco Shipping Holdings is the right partner for us.”

Share prices spike
Cosco Shipping Holdings’ stock jumped 6% in Hong Kong on Monday following the announcement, while OOIL’s rose 20%.

“For Maersk, MSC, I think it’s a matter of time that Cocsco will probably want to stake a claim to be the world’s biggest carrier,” an analyst told Reuters anonymously.

And BOCOM International analyst Geoffrey Cheng said the deal represented a premium to rivals like Maersk Line, as well as CMA CGM’s takeover of NOL.

“We think accepting the offer is the best option for OOIL investors,” he said.

“The merger would be complementary as OOIL is strong in transpacific and intra-Asia trade, and Cosco has strong China domestic trade,” said Samson Lo, head of Asia mergers and acquisitions at UBS.

Shareholder support
OOCL was founded in 1969 by Hong Kong shipping magnate Tung Chao-yung. His son Tung Chee-chen is chairman, president and chief executive of the company, while other family members hold senior roles.

Cosco, which grew its boxship platform following a merger with China Shipping, has the backing of Orient Overseas controlling shareholders, who hold two thirds of the stock.

“We respect OOIL’s management team and its expertise, not to mention its people, brand and culture,” said Wan Min, chairman of Cosco Shipping Holdings.

“Our company remains committed to enhancing Hong Kong as an international shipping center.”

“Following completion, we will continue to invest and strengthen our industry leadership, providing a more extensive platform for the employees of OOIL to excel.”

‘Happy ending’
Speculation has continued to surrounded the latest in a line of boxship mergers despite official denials a transaction was underway.

“This looks like a happy ending for both parties,” Han Ning, China director for Drewry Shipping Consultants, told Bloomberg.