China’s Cosco Takes Majority Stake in Orient Overseas
Deal for $6.3 billion creates the world’s third-biggest container carrier
The takeover deal confirmed an earlier Wall Street Journal report that the Chinese shipping giant was nearing a plan to buy the Hong Kong-based container shipping operator, which is controlled by the family of the city’s former chief executive Tung Chee-hwa.
Cosco has joined with the nation’s major port operator Shanghai International Port (Group) Co. to buy a combined 68.7% stake from Orient Overseas’ controlling shareholder the Tung family, the companies said Sunday in a joint statement.
The offer price of HK$78.67 per share ($10.07), represents a 31% premium over Orient Overseas’ Friday closing price of HK$60Friday. Orient Overseas’ controlling shareholder has signed an irrevocable undertaking to accept the offer, it noted.
The Chinese shipping group will be the world’s third-biggest container carrier after Denmark’s Maersk Line and Switzerland-based Mediterranean Shipping Co.
Cosco Shipping also said it offered to buy the remaining shares from Orient Overseas’ minority shareholders at the same offer price, though it plans to keep Orient Overseas’ listing status and branding after the transaction.
Shanghai International Port will own a 9.9% stake after the deal, which would require relevant approvals from regulators.
Individual container shipping players are struggling to stay profitable despite the industry’s $1 trillion a year revenues. Both Cosco and Orient Overseas posted losses last year.
After South Korea’s Hanjin Shipping Co. went bust last year, a wave of consolidation flooded the industry creating three global alliances. Cosco and Orient Overseas are members of the same alliance.
Upon completion of the offer, the combined Cosco Shipping Lines and Orient Overseas will have more than 400 ships and capacity exceeding 2.9 million twenty-foot equivalent unit container boxes, the joint statement said. Cosco Shipping said it believes the acquisition will enable both companies to realize synergies, enhance profitability and achieve sustainable growth in the long term.