Chinese shipper COSCO acquires Orient Overseas in US$6.3B deal
Acquisition target Orient Overseas reported a loss of $219.2 million for 2016, blaming extra capacity, slow growth and freight rates that sometimes dipped below those seen during the 2009 financial crisis
BEIJING—China’s biggest shipping company, state-owned COSCO Shipping Holdings Co., is acquiring rival Orient Overseas (International) Ltd. in a $6.3 billion deal that creates the world’s third-biggest container shipping company.
A wave of consolidation has created huge competitors in a global shipping industry that is struggling with sluggish trade and depressed prices.
On July 10, COSCO’s shares traded in Hong Kong jumped 4.7 per cent while Orient Overseas’ shares soared 19.5 per cent.
On its own, COSCO ranks No. 4 globally with 317 ships and 8.4 per cent of container traffic, according to Alphaline, an industry database. Adding Orient Overseas would give it market share of 11.7 per cent, moving it ahead of Marseilles, France-based CMA CGM Group.
The No. 1 shipper is Denmark’s AP Moeller-Maersk with 643 ships and 16.4 per cent of container traffic.
Orient Overseas, with 103 ships, is controlled by the family of former Hong Kong Chief Executive Tung Chee-Hwa.
The transaction is subject to antitrust reviews by Chinese, European and U.S. authorities, according to a filing with the Hong Kong Stock Exchange.
The filing said COSCO will pay $10.07 per share (HK$78.67), a premium of 38 per cent over Orient’s July 7 share price on the Hong Kong Exchange. The total price tag for the deal will be $6.3 billion (HK$49.2 billion).
AP Moeller-Maersk acquired Hamburg Sud of Germany in December. CMA CGM bought Singapore-based Neptune Orient Lines last year.
Orient Overseas reported a loss of $219.2 million last year. It blamed a glut of capacity, slow growth and rising fuel prices as well as freight rates that sometimes dipped below those seen in 2009 during the financial crisis.