Cosco has teamed with Chinese port operator Shanghai International Port Group (SIPG) to acquire Orient Overseas International Ltd (OOIL).
The new owners have pledged to keep the OOCL liner brand and its Hong Kong headquarters, and provided some assurances to worried staff that their jobs are safe for now.
The offer of HK$78.67 ($10.06) in cash per share represents a premium of about 30% on OOIL’s Friday closing price and values the company at around $6.3bn.
The Loadstar reported on 20 June that a takeover of the world’s seventh-biggest carrier by Cosco was “almost a done deal”, but this was dismissed by OOIL management as “fake news”.
Indeed, OOIL’s oft-repeated rebuttal that it was “not aware of, nor involved in any bid related to the company or OOCL”, appears to have been disingenuous.
However, behind-the-scenes negotiations appear to have been ongoing for months culminating in the Chinese state-owned carrier making the Tung family an offer they could not refuse.
Upon completion of the transaction, which remains subject to regulatory approval, as well as approval from Cosco Shipping Holdings shareholders, Cosco will hold a 90.1% stake in OOIL and SIPG 9.9%.
Combining Cosco’s container fleet with that of OOCL will see the merged carrier leapfrog CMA CGM to become the world’s third-largest container line with a market share of 11.5% for a total capacity of 2.42m teu, together with an orderbook of 640,000 teu.
After closing, Cosco and OOCL will “continue to operate under their separate brands” said a joint press release on Sunday. “Both companies are members of the Ocean Alliance and will continue to work together under this framework,” it said.
Andy Tung, chief executive of OOIL, whose family controls 68.7% of the company, said: “We are proud of the business we have built and the people who have been building it. 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.”
Significantly, Mr Tung was absent from receptions in North Europe last month for the maiden voyage of the OOCL Hong Kong – currently the largest containership in the world – which he had been expected to attend, having been “called away on business”.
Mr Wan Min, chairman of Cosco Shipping Holdings, said: “We respect OOIL’s management team and its expertise, not to mention its people, brand and culture.”
Cosco said that after the completion of the deal it intended to maintain OOIL’s headquarters and functions in Hong Kong and would “not terminate the employment of any employee at OOIL … for at least 24 months after the close of the offer”.
Commenting on the deal to The Loadstar this morning, Lars Jensen, CEO and partner at SeaIntelligence Consulting, said the merger was “the next logical progression in the continuing consolidation among carriers”.
He added: “With the decision to continue with the OOCL brand, Cosco is proceeding down the same path as Maersk and CMA CGM in terms of having a multi-brand strategy, as opposed to MSC and Hapag-Lloyd which are both pursuing more of a single brand strategy.”