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The prospect of a merger took a step forward yesterday when Hapag-Lloyd and CSAV signed a Memorandum of Understanding (MoU) that could pave the way for the Chilean carrier to become the largest shareholder in its German counterpart.
Although Hapag-Lloyd executives have stressed the tentative nature of the talks, and the line yesterday reiterated the non-binding nature of the MoU, an in-depth announcement to the Santiago Stock Exchange from CSAV revealed that if agreement is reached it would have a 30% stake in the combined company.
A due diligence process is now under way, which The Loadstar understands is expected to take a couple of months. If this is successful a binding agreement will be signed, after which the integration process will be prepared and approval sought from regulatory authorities.
The final closing of the deal is expected to take some months after that, in late summer or early autumn.
The talks include a plan to inject new capital of €740m into the merged entity in two €370m phases, with the second tranche following a floatation on an as-yet unidentified stock exchange.
The negotiations are being held between CSAV and the Albert Ballinn consortium, which comprises the city of Hamburg’s investment company, HGV, and Kuehne + Nagel owner Klaus Michael Kuehne., and holds 77.96% of Hapag-Lloyd, of which HGV has 37% stake and Mr Kuehne 28%. Smaller stakes are held by independent organisations.
Travel group TUI holds just over 22% which it has long indicated that it wants to sell. It holds a right, until the end of this year, to trigger a Hapag-Lloyd initial public offering (IPO), but would see its stake diluted if the first capital increase took place.
CSAV chief executive Oscar Hasbun said: “After the first capital increase, based on the assumptions of the transaction, CSAV would have a share stake close to 34% of Hapag-Lloyd,”
A number of issues still remain to be resolved. Under the terms of the MoU, the €740m capital increase has to be concluded within a year of the closing of the deal, and of the first €370m tranche, with CSAV subscribing €259m within 100 days of closure. How the other Hapag shareholders will raise their contribution remains unknown.
The second €370m tranche would be part of the Hapag-Lloyd stock market listing, although what sort of IPO target the combined company will set is also open to question.
A combined Hapag-Lloyd-CSAV would be the world’s fourth largest container shipping line, with vessel capacity of 1m teu carrying around 7.5m teu a year, with annual revenues of $12bn.
“The expected synergies from this business combination would be about $300m annually,” Mr Hasbun said.
Other than the capital injection into Hapag, CSAV also needs to complete the financing of seven 9,300teu vessels being built by Samsung in South Korea. The initial order was priced at slightly below $570m by shipbuilding analyst BRL Associates, and Mr Hasbun indicated yesterday that another $200m in finance still needed to be raised to acquire the ships.
The Hapag-Lloyd deal only concerns CSAV’s container business – its dry bulk, liquid bulk, conventional reefer and car-carrying arms will continue to operate as separate Chilean concerns.
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