French container line CMA CGM initiated exclusive discussions with Singapore-based Neptune Orient Lines Limited (NOL) and its controlling shareholder Lentor Investments Pte. Ltd., with respect to a potential combination.
CMA CGM said that no agreement has yet been reached and no assurance can be given that these discussions will lead to a definitive agreement.
The exclusivity period is expected to run until December 7th, 2015.
CMA CGM believes that, should these discussions lead to an agreement, such a combination would contribute to the consolidation of the container shipping industry, at a time when scale is more critical than ever.
The company said that the agreement “would further reinforce CMA CGM as a global force in container shipping, leveraging the strong geographic and operational complementarity of both groups.”
The news of exclusive merger talks comes against the backdrop of CMA CGM’s financial report for the third quarter of 2015, in which the French container line reported a 75% drop in net profit.
CMA CGM reported a net profit of USD 51 million for the third quarter of 2015, compared to USD 201 million net profit for the same period last year.
The company recorded USD 4 billion revenue for the quarter ended September 30th, 2015, a 9% drop compared to USD 4.37 billion revenue reported in Q3 2014, mainly due to falling freight rates.
The drop in revenue was partially offset by a 3.4% rise in volumes carried, which stood at 3.3 million TEUs.
“The container shipping sector is facing lower-than-expected volume growth, putting pressure on freight rates for many lines in the short term. Against this backdrop, the Group is continuing to make various capacity adjustments in order to maintain satisfactory load rates and optimise the use of its vessels,” the company said.
CMA CGM’s performance over the first nine months of 2015 resulted in net profit jumping to USD 613 million, a 56% year-on-year increase.
Container volumes reached 9.7 million TEUs in the first nine months of the year, a 6.5% increase year-on-year.