Maersk Line snaps up Hamburg Süd

Maersk Line snaps up Hamburg Süd

Hamburg Süd will become part of the Maersk Group by the end of 2017, strengthening Maersk's north-south presence.

Maersk Line Thursday announced it is buying German carrier Hamburg Süd from the Oetker Group and aims to close on the deal by the end of 2017.

The acquisition, the subject of speculation for the past few weeks, will cement Maersk's position as the world’s biggest container shipping line. Following the takeover, Maersk plans to operate joint north-south services with Hamburg Süd, which will increase frequencies, spread the line’s geographical coverage, and cut transit times.

“The acquisition of Hamburg Süd is in line with our growth strategy and will increase the volumes of Maersk Line and APM Terminals (Maersk’s port unit),” said Soren Skou, CEO of Maersk Line and the Maersk Group on a teleconference about the acquisition.

The Danish carrier did not reveal how much it is paying for the world’s seventh-largest container line, but it has been widely reported that the sale price will be around $4 billion.

“We have offered a fair price for a quality company,” Skou said on the call.

“Today is a milestone in Maersk Line’s history,” the Maersk CEO said in a written statement announcing the deal. “Hamburg Süd complements Maersk Line and together we can offer our customers the best of two worlds, first of all in the north-south trades.”

Hamburg Süd is the only one of the top 10 container lines with a strong focus on north/south trades, particularly to and from South America, with only very limited coverage of the major east-west trades through slot exchange agreements with United Arab Shipping Company and a few others.

The acquisition will grow Maersk’s capacity to around 3.8 million 20-foot-equivalent units, for a global market share of 18.6 percent, up from 15.7 percent currently. This significantly widens the gap with second-ranked Mediterranean Shipping Co., which has a 13.6 percent market share. Hamburg Süd currently operates a fleet of around 120 container ships with an aggregate capacity of about 625,000 TEUs, according to industry analyst Alphaliner.

The deal will also deliver “significant” synergies via the integration of services, lower variable costs, reduced unit costs, and increased buying power, Skou said.

Hamburg Süd was a well-run and highly respected company with strong brands, dedicated employees, and loyal customers, Skou said. The shipping operation markets its services through the brands of Hamburg Süd, CCNI (based in Chile) and Aliança (based in Brazil), which Maersk said it will continue to use.

The acquisition is a “unique” opportunity to boost Maersk’s presence in Latin America, grow its reefer business, and cement its global leadership, Skou said.

“We plan to maintain the Hamburg Süd brand ... therefore integration will be a lot simpler,” he said.

A “light touch” integration model will keep the German carrier “in the shape it is today” with a strong brand and market position. Hamburg Süd will remain headquartered in Hamburg.

The German liner’s strong position in Latin America will also be a “huge” benefit for SeaLand — Maersk’s intra-Americas shipping line — and its customers, Skou said. The US-based company currently has just between 1 percent and 2 percent of one of the biggest north-south trade, which is that between the east coast of South America and the east coast of North America.

Hamburg Süd had a 2015 turnover of $6.7 billion, of which $6.3 billion was generated by its container line activities.

Maersk said the acquisition was subject to a satisfactory due diligence, final agreement, and regulatory approval in jurisdictions such as China, Korea, Australia, Brazil, the United States, and the EU.

“Maersk Line will work closely with the authorities. Maersk Line expects the regulatory process to last until the end of 2017. Until then, Hamburg Süd and Maersk Line will continue business as usual,” the statement said.

“We expect the acquisition to be approved,” Skou said on the call.

Maersk Line in September announced that it planned to grow market share organically and through acquisitions, a comment that quickly placed Hamburg Süd on the “ripe for takeover” list. Operating outside of a formal alliance, the German carrier did not have the scale to compete with the larger shipping lines on the major trades.

Ottmar Gast, chairman of the executive board of the Hamburg Süd Group, said the sale brings to an end the family’s 80-year ownership of the carrier.

“We are very confident, though, to have chosen the best of all possible partners. Maersk will preserve and grow Hamburg Süd and what the brand and the whole organization and a highly dedicated workforce stand for,” he said.

Oetker said that while Hamburg Süd has been able to grow its business chiefly through re-investment of its cash flow in the past, future capital requirements would be too high given the current pace of consolidation in liner shipping.

That pace has only quickened of late. In the year 2000, the top five ocean liners controlled 35 percent of the world’s container capacity. By 2008, that had increased to 46 percent and by October 2016, 55 percent of the world’s capacity measured in TEUs was in the hands of the top five container lines, according to Goldman Sachs Research.

Alphaliner says that by 2018 there will only be 14 global carriers in operation, with the top seven lines controlling 65 percent of global capacity.

Skou said Maersk will decide what to do with Hamburg Süd’s non-container businesses, including dry bulk shipping and tankers, after it has closed on the transaction. Maersk currently operates tankers but quit the dry bulk market in 2002.

The company said will give further details of the transaction early in the second quarter of 2017.

Contact Bruce Barnard at brucebarnard47@hotmail.com.

Comments

Maersk continues their dominance.