News / Hapag-Lloyd tables $4.2bn Zim deal

UPDATED following Hapag-Lloyd press briefing

Hapag-Lloyd appears to have capsized Zim CEO Eli Glickman’s efforts to buy the Israeli container line, the German carrier confirming a merger agreement to acquire 100% of Zim’s shares for $4.2bn.

Both carriers “no commented” The Loadstar on specifics of the looming tie-up, prior to a Hapag-Lloyd press briefing, attended by The Loadstar, in which chief executive Rolf Habben Jansen said: “We have committed to pay $35 per share in cash, which means that would be a total equity consideration of a little bit over $4bn. We think that’s an attractive offer for shareholders, with a premium of over 50% over last week’s closing price.” According to Reuters, Zim was valued at $2.7bn on Friday.

By confirming Israeli financial institution FIMI Opportunity Funds’ involvement, Hapag-Lloyd also signalled that it had overcome the issue of the Israeli state’s holding in Zim, meaning rules of “Israeli heritage would be under consideration when it came to approving a sale”.

Known as a “golden share”, that stake means Zim is considered “an asset of strategic national importance”, and empowers the government to veto the sale of more than 24% of the stock.

Hapag-Lloyd said: “Negotiations with FIMI for assumption of obligations under these special rights are well advanced. Completion of the transaction would require additional regulatory approvals and consent of [Zim’s] shareholders.”

Asked if he was concerned about the Israeli government not approving the deal, Mr Habben Jansen said that Hapag-Lloyd had tabled “a very good solution” that was not only in the interest of the Israeli government, because of the participation of FIMI, but because it demonstrated Hapag-Lloyd’s “very clear commitment” to the market.

Without explaining how or why, he added that the deal would “probably will help to increase competition a little bit and may actually also help to keep costs under control”.

Speculation before the German carrier commented publicly suggested that it would be forking out anywhere from $3bn to the $4.2bn agreed upon, but with waits at shipyards increasing, JP Morgan claimed the deal would offer the German carrier a way to bolster its capacity in the near-term.

Vespucci Maritime CEO Lars Jensen noted that any agreement would see “Hapag-Lloyd take over the leased vessels, which according to the Alphaliner data amount to 611,000 teu of capacity, or 87% of Zim’s currently operated capacity”.

He added: “This will increase Hapag-Lloyd’s global market share from 7% to 8.8%. At a new global capacity of 3m, teu, it will remain the world’s fifth-largest container line, but now with a much wider margin to number six.”

Hapag-Lloyd’s interest was first mooted in December, shortly after Mr Glickman’s proposal was made public, with Zim acknowledging Mr Glickman’s bid in November, but noting it had already “commenced a strategic review into the potential alternatives”.

“The review, which has been ongoing for several months, includes consideration of potential value creation alternatives, including a sale and capital allocation and return opportunities, with the goal of maximising shareholder value,” it added.

Among names circulating as potential suitors were Maersk and MSC, the latter shot down as a non-starter by The Loadstar’s Gavin van Marle.

Together with Israeli automotive and shipping heavyweight Rami Ungar, Mr Glickman’s effort led to him issuing “a preliminary, non-binding proposal to acquire all the outstanding ordinary shares” of Zim not currently under his control.

Asked about Mr Glickman’s future, Mr Habben Jansen said: “I assume that we will continue for the foreseeable future. But that’s, of course, a question that you would have to ask the Zim board.”