CMA CGM to establish regional headquarters in Singapore after NOL takeover

Container shipping firm Neptune Orient Lines (NOL), which is in talks with France’s CMA CGM to be acquired, on Monday (Dec 7) halted the trading of its shares on the Singapore Exchange (SGX).

Global shipping companies had average operating margins of negative 1.8% in the third quarter, compared with a 3.4% profit margin a year earlier, according to shipping-data provider Alphaliner.

He said the combination of the two companies “will create a leading shipping company” worldwide.

If the deal gains antitrust approval, CMA CGM will launch an offer at a price of SG$1.30 per share, which represents a 49 per cent premium to NOL’s unaffected share price. Temasek, which owns a almost 67 percent stake in NOL, accepted the offer and will tender all of its shares, CMA CGM and NOL said in a joint statement.

It said CMA CGM needed to complete due diligence by the deadline.

But CMA CGM, which has $5 billion of debts, will be burdened by NOL’s debts of $2.9 billion. Last year, the group handled more than 12 million TEUs and generated up to $16.74 billion in revenues. Overcapacity, slower economic growth and weak commodity prices could put smaller shipping firms at risk, and consolidation is highly likely among the larger ones, ratings agency Fitch said in a report last week.

“The acquisition will enable the offeror to cement its position among the global leaders in the container shipping industry”, CMA CGM said in a statement.

“The global industry valuations remain depressed and for NOL to achieve closer to book value at sale is commendable”, he told AFP in an email. Neptune Orient, which has posted losses in five of the past six years, is among shipping companies exploring mergers and acquisitions amid a glut of capacity, declining demand and lower rates that could make this the industry’s worst year since 2009.

Singapore also looks set to play a significant role in CMA CGM’s future plays.

NOL this year sold its logistics business – APL Logistics Ltd. – to Japan’s Kintetsu World Express Inc. for $1.2 billion.