M&A radar: MSC (vs Mærsk) – a bit Amazon, a bit UPS. With an eye on Schenker...
Targeted arbitrage, anyone?
There are “significant obstacles” to the sale of Singapore-based Neptune Orient Lines (NOL), despite interest from Maersk Group and CMA CGM, according to Alphaliner.
After weeks of speculation, NOL finally confirmed “preliminary discussions” with the two leading liner shipping companies to sell its container line business, which it operates under the APL brand, and other assets.
NOL said it had “a duty to assess all options to maximise shareholder value”.
It added: “From time to time, NOL enters into discussions on possible combinations involving NOL, while remaining focused on returning its core liner business to sustainable growth and profitability.”
Confirmation of the talks boosted NOL’s depressed share value, but Alphaliner argued that “the attractiveness of APL’s business has diminished significantly”, due to “chronic unprofitability since 2009”.
The consultant noted that NOL had been obliged to sell its Singapore headquarters and its profitable logistics arm in the past three years to prop up its balance sheet. Indeed, while the sale of its “family silver” bought some breathing space, APL remains unprofitable despite a raft of cost-cutting programmes and vessel efficiency initiatives. It recorded a $96m loss in the third quarter.
Service cutbacks and off-hiring of as much chartered tonnage as possible may have helped APL’s bottom line, but it meant its global capacity share declined to just 2.8%, compared with 4.2% in 2010, according to Alphaliner data.
It is unlikely that Maersk and CMA CGM are that interested in APL’s Asia-Europe business – the former could face anti-competition hurdles, given its existing market share and ongoing 2M alliance, so any attraction is likely to be in its other tradelanes.
But even on its core transpacific trade, APL’s Asia-US market share stands at just 5.5%, versus 8.6% five years ago. At the turn of the century, APL was a traditional top-three carrier where now it ranks eighth.
In terms of assets, its 55 containerships have a current market value of just over $3bn (book value in December 2014 was $4.7bn), according to vesselsvalue.com data. They have a scrap value of $582m and an average age of eight years.
In view of this, Alphaliner suggests NOL’s container terminal portfolio may be the “jewel in the crown”. Its investments in boxport facilities around the world include Los Angeles, Rotterdam and Kaohsiung.
CMA CGM is Alphaliner’s favourite to acquire NOL, as it is reported to be at due diligence stage, but the major obstacle will be the price, given the current parlous state of the industry.
NOL said it would “make an appropriate announcement in the event that there are any material developments”. Until then it is business as usual for APL.
In a separate report today, The Loadstar’s financial columnist, Alessandro Pasetti, suggests Maersk may have other reasons for an interest in acquiring NOL.