Global box carriers Hapag-Lloyd and United Arab Shipping Company (UASC) announced on July 18 that they have signed an agreement to combine business operations, which will create one of the world’s five largest liner shipping companies operating one of the most modern fleets in the industry.
An official statement said the two “have signed a Business Combination Agreement (BCA) to merge both companies, subject to the necessary regulatory and contractual approvals.”
Once approved, the merger is expected to be completed by the end of 2016. Until then, UASC and Hapag-Lloyd will continue to operate as stand-alone companies. Each company will also operate in its own alliance as currently structured until the end of March 2017, the scheduled launch of the newly formed “THE Alliance.”
The combined company will be the key player in the THE Alliance—consisting of Hanjin, Hapag-Lloyd, K-Line, Mitsui O.S.K. Lines, Nippon Yusen Kaisha, and Yang Ming. THE Alliance will cover all East-West trade lanes, including Asia-Middle East/Arabian Gulf and Red Sea.
Besides the merger agreement, the partners have assumed certain commitments with regard to the merger and the future equity funding of the company in a separate agreement, the so-called Shareholders Support Agreement (SSA). In that agreement some of the controlling shareholders of either side have committed to backstop a cash capital increase amounting to US$400 million, planned by way of a rights issue within six months of the closing of the transaction.
Hapag-Lloyd is represented by major shareholders CSAV Germany Container Holding GmbH, HGV Hamburger Gesellschaft für Vermögens-und Beteiligungsmanagement mbH, and Kühne Maritime GmbH. On the side of UASC are Qatar Holding for the State of Qatar and The Public Investment Fund of the Kingdom of Saudi Arabia.
Following the integration, the new Hapag-Lloyd will rank among the five largest container shipping lines in the world, with 237 vessels and a total transport capacity of around 1.6 million TEUs, an annual transport volume of 10 million TEUs, and a combined turnover of about $12 billion.
The combined company will remain a registered and stock listed company in Germany with its head office in Hamburg. CSAV, HGV (City of Hamburg), and Kühne Maritime will remain controlling shareholders of Hapag-Lloyd. The majority shareholders of UASC, Qatar Holding (QH) and The Public Investment Fund of the Kingdom of Saudi Arabia (PIF), will become new key shareholders of Hapag-Lloyd, holding 14%(QH) and 10%(PIF), respectively.
“This strategic merger makes a lot of sense for both carriers—as we are able to combine UASC’s emerging global presence and young and highly efficient fleet with Hapag-Lloyd’s broad, diversified market coverage and strong customer base. Furthermore it will give the new Hapag-Lloyd access to Ultra Large Container Vessels,” said Rolf Habben Jansen, CEO of Hapag-Lloyd, upon signing the agreement.
“After the successful integration of CSAV which was concluded mid of 2015 this transaction with UASC is another historic milestone for Hapag-Lloyd. The merger reinforces our position as a top 5 and one of the largest truly global carriers in liner shipping.”
The combined company will have a global, diversified trade portfolio, with product offerings in the major East-West and North-South trades. In addition, it will leverage on UASC’s presence in Middle Eastern markets and trades, with a commitment to further strengthening this presence by establishing a fifth Hapag-Lloyd regional center in Dubai.
The fleet of the combined company will consist of 237 ships—including UASC’s six recently received 18,800-TEU ships as well as 11 newly built 15,000-TEU ships, the last of which will be delivered soon. With an average age of 6.6 years and average size of 6,600 TEUs, the combined company will have one of the most modern and efficient vessel fleets in the industry, said the statement.
“Hapag-Lloyd and UASC now take the next step to further consolidate and shape the liner shipping industry. The new transaction is strengthening not only our market position, but also our service portfolio. The merger will create annual net synergies of at least 400 million US Dollars and save a significant amount of capital expenditure for the company,” said Michael Behrendt, chairman of the supervisory board of Hapag-Lloyd.
