Shipping - Oetkers mull HAMBURG SÜD sale

HAMBURG SÜD will go to MOELLER-MAERSK till the end of 2017. The shipping arm of Danish conglomerate A.P. MOELLER-MAERSK A/S, the world's biggest shipping company, is to buy smaller rival HAMBURG SÜD (HAMBURG SÜDAMERIKANISCHE DAMPFSCHFFAHRTSGESELLSCHAFT), joining a wave of M&A in the industry just over two months after the Danish company revealed plans to bolster its transport operations. While it has bought or chartered ships from distressed peers like Korea’s Hanjin Shipping Co., which declared bankruptcy in August, Maersk’s last full-scale acquisition was in 2005 when it bought P&O Nedlloyd. The container market is in turmoil since the finance crisis of 2007. Rates for shipping containers fell significantly near sero.

Ottmar Gast CEO of Hamburg Süd - courtesy HAMBURGER ABENDBLATT

According to Ottmar Gast HAMBURG SÜD was courted like a beautiful bride with a big dowage.

The deal, announced by parent A.P. Moller-Maersk (MAERSKb.CO) on Thursday, is the group's first full takeover in more than a decade and highlights a consolidation drive in container shipping, which has been grappling with low freight rates and oversupply. It also follows Maersk's new boss Soren Skou's move to focus on transport and logistics and spin off the company's energy operations. Maersk shares rose more than 5 percent.

Hamburg Süd - courtesy HAMBURGER ABENDBLATT

Hamburg Süd vessel - courtesy HAMBURGER ABENDBLATT

HAMBURG SÜD, part of the OETKER GROUP, is the world's seventh largest container shipping line and operates 130 container vessels primarily in trade between the northern and southern hemispheres. MAERSK has a fleet of more than 600 ships.

"This will provide us with a very strong platform in Latin America," Skou, chief executive of MAERSK LINE and the MAERSK GROUP, said on a conference call, noting "significant" cost benefits from combining the companies' network.

Skou declined to disclose the value of the deal, as OETKER did, but said it would be a cash only transaction, and that MAERSK did not need to sell other assets to ahead with the purchase. He also said MAERSK would be looking at a "light-touch integration" of family-owned HAMBURG SÜD, keeping both the brand name and the company's headquarters in Hamburg. "I would imagine that more consolidation can happen in the future. Even with this acquisition, the market is still quite fragmented, and I would be surprised if this was the final piece," Skou said.

With the acquisition, MAERSK LINE will increase its container capacity to around 3.8 million TEU (20-foot Equivalent Unit), boosting its market share to 18.6 percent from 15.7 percent, it said. MAERSK's combined fleet will consist of 741 container vessels with an average age of 8.7 years, compared with 9.2 years before the deal.

The transaction will help MARSK LINE to boost its presence in global trade, especially in Latin America where HAMBURG SÜD has had a strong presence since its foundation in 1871 by representatives of Hamburg merchant houses.

"It's a smaller and more niche player – it's a good strategic fit for MAERSK," analyst Michael Jorgensen at Alm. Brand Bank said. He described the acquisition as a defensive consolidation. Alm. Brand has a "buy" recommendation on MAERSK.

HAMBURG SÜD has 5,960 employees in more than 250 offices across the world. Last year, the OETKER GROUP's revenue was $12.73 billion and of that $6.26 billion came from its container line activities in HAMBURG SÜD, MAERSK said. Hopefully the strong ties of the employees will stay, as the OETKER GROUP had a very specific employment philosophie which guaranteed loyality. And MAERSK announced not to change it. Therefore with the sale all HAMBURG SÜD employees will get a "Thank you gratification" for being loyal to the company. OETKER GROUP is involved in shipping, banking, luxury hospitality, food and beverages. There had been speculation in the shipping market that the OETKER-family would opt to sell its container business.

Top and below OETKER beverage portfolio beer - courtesy OETKER

OETKER beverage portfolio sparkling wine - courtesy OETKER

Top and below OETKER kitchen aid and conveneance products - courtesy OETKER

OETKER chemistry portfolio - courtesy OETKER

OETKER portfolio banking BANKHAUS LAMPE - courtesy OETKER

The Lanesborough Oetker Collection - courtesy Oetker Hotelmanagement

The sale is not an emergency sale, but to be fit for the future in an uncertain market, massive investments had to be made, which the family could not make on its own, or with his own bank - BANKHAUS LAMPE. "Giving up our engagement in shipping after an 80 year-long ownership in HAMBURG SÜD was not an easy decision for my family," said August Oetker, chairman of the advisory board behind the management holding company of the OETKER GROUP. HAMBURG SÜD has made no losses as some reported, but HAMBURG SÜD was a single in a merging market and alone without any cooperation or alliance. But a well reputated market leader in the South Atlantic trade.

CAP SAN DIEGO, today a preserved Cap San Class vessel, The White Swans of the South Atlantic - own collection

Other container lines have been looking to do deals to build scale. Family-owned French group CMA CGM sealed an acquisition this year of Singapore-based NEPTUNE ORIENT LINES, which has given it market leadership on trans-Pacific routes.

Building scale is behind the growing of OETKER COLLECTION since 2010 when there had been moves to sell the 5star top luxury hotels. Amoung these are the HOTEL CAP EDEN ROC, LE BRISTOL, Paris and others, amoung the new hotels is FREGATE ISLAND in the Seychelles.

International a synoym for South America trading HAMBURG SÜD - poster copy own collection

Last week, the European Commission gave conditional approval to a merger between German container shipping line HAPAG-LLOYD (HLAG.DE) and the UNITED ARAB SHIPPING COMPANY. In 2012/13, a planned merger between HAPAG-LLOYD with rival HAMBURG-SÜD was called off some time as terms could not be agreed. In first place the younger family members had been disagreeing. This solution but was the wish of the politics in the interest of saving employment and taxes in Hamburg, but without a further financial engagement of the city of Hamburg, as in HAPAG-LLOYD. But too the HL puchasing of the Chilenean CSAV was a reason not to merge.

MAERSK containers - courtesy MAERSK LINE

MAERSK said the deal would be subject to final agreement and regulatory approvals, and would have no impact on MAERSK's outlook for 2016. A.P. MOELLER-MAERSK said it expected to give more details following approval of the purchase agreement which is expected early in the second quarter of 2017.

History - HAMBURG-SÜD and the CAP express liner

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