News / Hapag-Lloyd would create 'New Zim' JV for domestic trades

Photo: Hapag-Lloyd

Hapag-Lloyd CEO Rolf Habben Jansen spent last night fielding questions on the German carrier’s plans for Zim, should its proposed $4.2bn cash acquisition of the Israeli liner get over the finish line.

Following “unanimous” approval from Zim’s board, the carriers yesterday confirmed a $35 per share merger agreement had been reached, supported by Israeli financial outfit FIMI Opportunity Funds, the country’s leading private equity fund with more than $11bn in assets.

It will create a ‘New Zim’ carrier to cater for domestic needs.

With Hapag wanting 100% and Israel’s government holding 1% of a line it deems of “strategic national importance”, the participation of FIMI and the formation of the new line is pivotal to assuage government concerns and achieve regulatory approval.

Having been dispatched to a hastily arranged press conference, attended by The Loadstar, Mr Habben Jansen said New Zim – “securely serving main global trades into Israel” with 16 vessels – would begin operating with an “initial three services”.

“One  would operate between Israel and the east coast of the US, while the other two would operate intra-Mediterranean services, of which one is a copy of what Zim does today,” he added.

The carrier noted New Zim would operate with owned tonnage and that Israel’s ‘special state share’ would be transferred to the newly created FIMI subsidiary.

Operating under the Zim trademark, it will be owned and run by FIMI, supported by a long-term strategic partnership with Hapag-Lloyd, including commercial support for an initial period “to allow structured commencement of operations”, Zim said.

Mr Habben Jansen said Zim’s chartered fleet would also support getting the new business up and running, but he rebutted any concern over Zim’s over-reliance on chartered capacity, given the present market conditions.

He added: “Zim has a modern fleet, which is pretty flexible. We like the fact that there’s quite a lot of ships that are mostly chartered. I think chartered tonnage gives you quite a lot of flexibility. Hapag-Lloyd also has a fair bit of chartered tonnage, which means, dependent on how good or not so good the market is, you actually have lots more flexibility to adjust your cost base.”

Even so, he admitted, should the deal be finalised the percentage of chartered tonnage across the two lines was “probably a little bit on the high side”, adding that, “over time, one should expect that we then bring that down a little bit”.

With New Zim covering Israeli routes to Europe and the US east coast, Hapag-Lloyd will take control of the remaining 92% of capacity, with responsibility for the carrier’s Asia-Med service into Israel alongside its international shipping activities.

Linerlytica pointed out that, with close to 656,000 teu, the combined Hapag-Lloyd/Zim fleet would hold a dominant 22% market share of the Far East–East Coast North America trade, ahead of Cosco/OOCL’s 15% .

Further to which, the deal will also result in a widening of Hapag-Lloyd’s predominance on the Mediterranean-North America trades, boosting it from a 14% share to 23%.

Another issue flagged by the deal’s impact on a potential Red Sea return, was the receding but nonetheless present threat from the Iran-backed Houthi militia, which has restricted its targeting to that of Israeli vessels.

Asked if he was concerned that by acquiring Zim, Hapag-Lloyd would open its vessels up to being targeted, Mr Habben Jansen said that while it was “ very difficult to read what they [Houthis] would do”, he felt it unlikely.

He added: “I think in this case, we would acquire the shares of Zim and that means that the ownership of Hapag-Lloyd will essentially remain unchanged. So, I think it [Houthis targeting Hapag-Lloyd as an Israeli entity] would factually be incorrect.”