Buoyed by profits, the sale of some assets and cash infusions from two outside investors, CMA CGM is sporting a much healthier balance sheet this year than it was just two years ago. If it continues to post profits and the financial markets allow, it will launch an initial public offering of its stock at the end of 2014.
“We believe that in order to go through an IPO, we need to make sure the company is doing well financially,” said Rodolphe Saade, executive officer of the world’s third-largest container line.
“2012 was a good year. We expect 2013 to be pretty much the same. And 2014 is too soon to say, but if the results are good, then we should definitely consider an IPO,” he said.
The French carrier, which came close to bankruptcy in 2011, when more than $5 billion in bank debt threatened to sink it, has whittled that debt down to $4.2 billion and reduced the number of creditor banks.
“Instead of dealing with 72 banks, we are now dealing with 66 or 67 banks, and we are working on reducing this to a more reasonable level.” Saade said in an interview with the JOC.
He said the Marseilles-based shipping line is paying its banks debt down at the rate of about $1 billion per year in interest and principal. “That’s many ships,” he said.
CMA CGM wants to maintain strong relations with its lenders. “At the same time, when you are in shipping and you invest billions of dollars, you need to make sure that you have enough banks to help out to finance your developments,” Saade said.”
CMA CGM posted a net profit of $102 million in the first quarter of 2013, compared with a $240 million loss a year earlier.
It earned a full year 2012 profit of $361 million, compared with a $5 million loss for full year 2011.
In June, the French line closed on the sale of a 49 percent stake in Terminal Link, its global container terminal unit, to China Merchants Holdings for $532 million, which it put into its cash reserves rather than help pay down its $4.2 billion net debt.
“The sale does not change control of the company, because we keep control of 51 percent,” Saade said. “Not only does it allow us to increase our cash flow, but at the same time it allows us to team up with a Chinese investor who will also be a partner in terminal investment in the future.”
He said that while it is too early to talk about what port investments Terminal Link is planning, it is looking at possibilities all over the world. ”We are looking at various places, but these terminal investments do cost a lot of money, so we need to be careful as we do not have too many spots that we can invest in.”
CMA CGM also closed on an investment of $150 million in July by Le Fonds Strategique d’Investissement, the French government’s sovereign wealth fund, which acquired a 6 percent stake in the carrier.
Last year, the Yildirim Group, a Turkish investment group, invested a total of $350 million in two separate transactions in return for a 24 percent stake in the ocean carrier.
But even with these two outside investments, the Saade family remains firmly in control of the company that was founded by Rodolphe Saade’s father, Jacques Saade, who owned Compagnie Maritime d'Affrètement and acquired Compagnie Générale Maritime in 1978.
“Now that FSI is on board, we will have a total of 13 board members,” Saade said. “Prior to the arrival of FIS, we were 10 board members. With FSI, there will be 13, one for FSI and an additional two for my family. Yildirim will have three, the FSI, one, and the Saade family will have nine.”