French liner company CMA CGM announced a pre-conditional voluntary general cash offer for Singapore’s Neptune Orient Lines (NOL) subject to the meeting of the relevant pre-conditions.
NOL’s majority shareholders, Temasek and its affiliates, have irrevocably undertaken to tender all of their shares in acceptance of the offer.
Upon approvals from antitrust authorities, CMA CGM will launch an offer at a price of SGD 1.30 per share, a total of S$3.4 billion (USD 2.43 billion), which represents a 49% premium to NOL’s unaffected share price and a 33% premium to NOL’s 3 month volume-weighted average share price to July 16, 2015.
“Leveraging the complementary strengths of both companies, CMA CGM will further reinforce its position as a leader in global shipping with combined revenue of USD 22 billion and 563 vessels. By bringing together the know-how of both teams, the enlarged group will be even better positioned to provide premium services to its customers across all markets. At a time when the shipping industry is facing strong headwinds, scale is more critical than ever to capitalize on synergies and capture growth opportunities wherever they arise,” said Rodolphe Saadé, Vice-Chairman of CMA CGM.
Ng Yat Chung, CEO of NOL, said: “The combined market presence delivered by the transaction would achieve the scale needed to enhance competitiveness for NOL’s operations and offer a clear and sustainable long term direction for the combined entity. The transaction would enable NOL to grow as part of a larger entity with the resources of the world’s third largest container shipping line.”
The acquisition would enable CMA CGM to achieve capacity of 2,399 thousand TEUs and combined fleet of 563 vessels. It would also secure it a market share of approximately 11.5% (vs 8.8% for CMA CGM and 2.7% for NOL) and combined turnover of c. USD 22 billion.
The move would also enable CMA CGM, which has a strong position on the Asia-Europe, Asia-Mediterranean, Africa and Latin America routes, to benefit from APL’s strong presence on the Transpacific, Intra-Asia and Indian subcontinent shipping routes.
In addition, the enlarged entity also plans to strengthen its position on strategic shipping routes, especially in key markets such as United States, Intra-Asia and Japan, and will boast a balanced trade portfolio. Following the transaction, the combined group would hold market shares from 7% to 19% on the routes on which it operates.
The combined entity would also reinforce Singapore’s position in the maritime and shipping sector as the city-state seeks to increase maritime services and transportation volumes, including committing more volumes through Singapore. In this regard, CMA CGM plans to establish its regional head office in Singapore.
The bid comes when the container shipping industry faces significant challenges with strong pressure on capacity and pricing and are is in desperate need of consolidation. The transaction is valuing NOL at a price to book ratio of 0.96 times and it would be financed by a combination of available cash and bank financing provided by a syndicate of international banks.
Post-closing, CMA CGM intends to deleverage its balance sheet within 18 to 24 months through synergies and assets sales for an amount of at least USD 1 billion, with the aim to reduce debt gearing ratio to below 0.8 times.
The boards of NOL and CMA CGM have unanimously approved the terms of the proposed transaction, which is still subject to the approval of the relevant anti-trust authorities as set out in the Pre-Conditional Offer Announcement.
The offer will be launched after approval of the relevant authorities which is expected by mid-2016.