News / End of a maritime chapter as TUI sells its final stake in Hapag-Lloyd

11/07/2017

German travel group TUI has finally sold its remaining stake in Hapag-Lloyd, ending an investment in the container line that spanned almost two decades.

TUI said yesterday it had agreed the sale of its 8.5m shares for €244m ($278m), taking its share disposal in the carrier since March to around €400m.

Following the merger with UASC, which closed in May, TUI had retained an 8.9% stake in the new entity.

Hapag-Lloyd’s share price is enjoying a 52-week high of around €32.50, from a low last year of just €16, based on the expectation of a recovery for the liner industry.

Having acquired Hapag-Lloyd in 1998, tourism giant TUI purchased the multiple-brand business of CP Ships in 2005 for $2bn, which propelled the carrier to fifth-largest in the world.

However, with a radical change of strategy, TUI decided to focus on its core travel business and moved towards divesting its exposure in the oft-troubled liner industry.

In 2008, TUI was close to a sale of Hapag-Lloyd to Singapore’s Neptune Orient Lines for a reported $5bn, but at the last minute a consortium of Hamburg businessmen, titled Albert Ballinn, stepped in, securing a two-thirds stake in the carrier to keep the company in German hands. TUI retained 33% as an “entrepreneurial stake”.

CSAV became the largest shareholder in 2014 with 31.4%, after the Chilean carrier’s container business was merged into Hapag-Lloyd. It retains that position, but with a diluted 22.6% stake, following the recent merger with UASC.

Unlike Maersk, CMA CGM and now Cosco, which maintained the trading names of acquisitions, Hapag-Lloyd’s management has opted to dispense with the household names in favour of a beefed-up single brand.

In a separate development, Hapag-Lloyd said yesterday it had signed a “strategic cooperation agreement” with China’s Bank of Communications Financial Leasing that will provide up to $500m to support the carrier’s fleet expansion. And on 3 July, Hapag-Lloyd successfully launched a 5.25% ticket €300m bond offering to redeem 7.5% and 7.75% notes due for repayment in 2018 and 2019, thus reducing its interest burden.

The carrier also received a boost from rating agency Standard & Poor’s, which advised that it had taken the carrier off its “CreditWatch” listing, where it had stood since 26 April, ahead of the completion of the merger with UASC.

S&P reconfirmed Hapag-Lloyd’s pre-UASC corporate credit rating of B+ “Outlook Negative” on the expectation of a sustained improvement in freight rates, but with remaining concerns that another rate war could erupt.

In the first quarter, Hapag-Lloyd slid back into the red to the tune of $66m, hit by higher fuel prices and alliance restructuring costs. However, many higher contract rates between Asia and Europe did not kick in until the second-quarter, and that, coupled with a higher spot market, should ensure that the German carrier posts improved results for the first half when it reports in August.