Freight News, Sea

Cosco-OOCL merger to create world’s third largest shipping line

[ July 22, 2017   //   ]

China’s Cosco Shipping confirmed market talk on 9 July when it announced that it was buying a nine-tenths share of Hong Kong-based Orient Overseas International, parent company of OOCL, with Shanghai International Port Group (SIPG) taking the remaining 10%. The deal is subject to regulatory approval, but has been accepted by OOCL’s controlling shareholder.

The US$6.3bn deal will create the world’s third largest shipping line, with a total of 2.9m teu and second only to 2M partners Maersk and MSC, and knocking CMA-CGM into fourth place.

However, analysts suggested that the Chinese company’s ambitions may not stop there and that further purchases could potentially see it surpass one or both of these carriers.

COSCO – itself the product of a recent merger between Cosco and China Shipping – said that the OOCL brand would be retained. “We respect OOIL’s management team and its expertise, not to mention its people, brand and culture,” declared Cosco Shipping chairman Mr Wan Min in an official statement.

OOIL executive director, Andy Tung added: “We are proud of the business we have built and the people that have been building it. This decision has been carefully considered and we believe it helps ensure the future success of OOIL.”

COSCO and SIPG also confirmed that there would be no redundancies as a result of the merger and that OOIL’s global Hong Kong headquarters would be retained.

Shipping analysts Drewry commented that OOCL have made above-average profits in a challenging market and have a reputation for being a very well-run company. Its owned fleet of 66 containerships (around 440,000teu) had an average age of only 7.1 years. It has just introduced its first 21,000 teu vessel with five more due to delivered and options for six more.

Trade analysts Panjiva said however that regulatory approval may be a challenge, particular in the US, where its data showed that the combined entity will become a top three operator on six inbound routes including from China.
However, Drewry pointed out that OOCL does not come with any alliance entanglements – both OOCL and Cosco already belong to the Ocean Alliance (along with CMA CGM and Evergreen) mainly in the east-west trades and is not a major player in the North-South trade lanes that fall outside of the scope of the carrier group.

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