Chinese shipping giant Cosco is set to buy its Hong Kong rival OOIL for $6.3bn. The deal would make Cosco the world’s third biggest shipping company, with more than 400 vessels. OOIL’s majority owner has accepted the bid, though the sale will still need regulatory approval. It would be the latest in a wave of mergers, which has left the top six shipping lines controlling almost two thirds of the market.
Overcapacity struggles
OOIL’s subsidiary OOCL is currently the world’s seventh largest shipping line, with 3.2% of global market share, according to shipping database Alphaliner.
The family of Hong Kong’s first Chief Executive Tung Chee-hwa founded OOIL, and still holds a 69% stake in the company.
They have accepted the offer, but it still needs the approval of Cosco shareholders, as well as US and Chinese regulators.
Overcapacity and slowing demand is leading to major changes in the shipping industry.
Korean shipping giant Hanjin filed for bankruptcy last year, while France’s CMA CGM bought Singapore’s Neptune Orient Lines.
According to OOIL, the combination of COSCO Shipping Holdings and OOIL can deliver a stronger competitive advantage, as both are among largest container companies in the world. The two companies will operate more than 400 vessels, with capacity exceeding 2.9 million TEUs including orderbook. The deal also sees COSCO becoming the world’s third largest container liner, according to Reuters.
It is noted that COSCO Shipping Lines and OOIL will continue to operate under their respective brands, providing container transport and logistic services. By leveraging the strengths of each company and achieving synergies, the businesses will enhance their operating efficiencies and competitive positions to achieve sustainable growth in the long term. Both companies are members of the Ocean Alliance, and will continue to work together under this framework.
The Joint Offerors intend to maintain OOIL’s listed status following close of the offer, to retaining the existing compensation and benefit system at OOIL. Therefore, they will not terminate the employment of any employee at OOIL for at least 24 months after the close of the offer.
They also aim “to maintain OOIL’s global headquarter functions and presence in Hong Kong, and utilize the advantage of both companies’ global network to contribute to the economic prosperity of the territory and development of Hong Kong as an international shipping center.”
The board of directors of OOIL has established an Independent Board Committee to advise the shareholders of OOIL in connection with the offer.
