German ocean carrier Hapag-Lloyd revealed it is discussing a possible merger with United Arab Shipping Company.Ocean carrier Hapag-Lloyd said Thursday it is discussing forms of cooperation with United Arab Shipping Company (UASC), such as a potential combination of their mutual container shipping operations, while also noting there is no binding agreement and no assurance that an agreement will be reached.
Hapag-Lloyd added the discussion of a combination is based on the possibility that it would own 72 percent of a combined company and UASC would own 28 percent, “subject to a mutually satisfactory completion of the negotiations and the mutual due diligence exercise.”
The announcement comes just one day after UASC’s partners in the OCEAN 3 vessel sharing alliance, CMA CGM and China Shipping, announced they would leave that agreement and form a new alliance called the OCEAN Alliance.
The announcement of the new alliance, China Shipping’s merger with COSCO earlier this year, and CMA CGM’s pending acquisition of Neptune Orient Line and its APL brand, has also reduced the G6 Alliance to which Hapag-Lloyd is a member to just four members. The new OCEAN Alliance will include COSCO China Shipping, CMA CGM and APL, OOCL and Evergreen.
The creation of the OCEAN Alliance is expected to leave carriers not included, such as Hapag-Lloyd and UASC, scrambling to form new, strong partnerships to compete with the OCEAN Alliance and the 2M Alliance of Maersk and MSC.
A merger with UASC would give Hapag-Lloyd strong access to the market in the Middle East, much as its acquisition of CSAV's container business in 2014 strengthened its presence in South America.
It would also give it access to large new ships. UASC is in the midst of a program to order 17 new ships, including six 18,8000-TEU ships, which have been delivered to the company in 2015 and 2016; and seven of 11,15,500-TEU ships, which have been delivered between 2014 and this year.
UASC says it has a total fleet of 60 vessels including seven, 6,921 TEU ships, all built in 2008, along with 10 ships with 4,101 TEUs of capacity, all built in 1998. The rest of its fleet is chartered.
Founded in 1967, UASC is a strong financial partner for Hapag Lloyd. UASC is owned by a half dozen countries in the Middle East. In 2014, Qatar increased its ownership in the company to 51.27 percent, according to a 2014 Federal Maritime Commission document. The minority owners are the United Arab Emirates, Bahrain, Saudi Arabia, Iraq and Kuwait.
The Alphaliner Top 100 fleet list lists Hapag-Lloyd as the sixth largest shipping company and UASC as the 10th largest. A merger would jump it into fifth place on the Alphaliner list, ahead of Evergreen, but behind, Maersk, MSC, CMA CGM and Cosco Container Lines, which now includes China Shipping.
While Hapag-Lloyd's press release says it has 177 containerships, Alphaliner says its fleet consists of 170 ships with 924,114 TEU capacity--70 owned ships and 100 chartered as well as five ships on order.
Alphaliner says UASC has 57 ships with 546,932 TEU capacity, with 38 owned and 19 on charter as well as 4 on order.