Shipping Giants Work Together To Overcome Slump

apag-Lloyd AG signed a binding agreement to take over most of Chilean rival Cia. Sud Americana de Vapores SA (VAPORES)’s assets and become the fourth-largest container shipping company in the world.

CSAV, controlled by Chile’s billionaire Luksic family, will own a third of the shares in the new company that combines Hapag-Lloyd’s 151 vessels with CSAV’s fleet of about 50, according to a Chilean regulatory filing yesterday. The Luksics, German billionaire Klaus-Michael Kuehne and the City of Hamburg will own 75.5 percent and control the new company.

Kuehne and the Luksics are combining to compete on more equal terms with industry leader A.P. Moeller-Maersk A/S after an oversupply of vessels coincided with slowing demand to produce a prolonged slump in the container shipping business.

Hapag-Lloyd, which had a loss of 97.4 million euros last year ($135 million), will reap annual savings of about $300 million, CSAV Chief Executive Officer Oscar Hasbun said on March 21. The companies signed a memorandum of understanding in January. The combined company, with annual revenues of $12 billion, will strengthen its presence on Europe-Latin America and Latin America-Asia routes.

Hapag-Lloyd CEO Michael Behrendt, who retires at the end of June, has said an IPO may take place in 2015 once conditions in the shipping industry normalize. German tour operator TUI AG (TUI1), which holds a 22 percent stake in Hapag-Lloyd, may use the stock sale as an exit, as the Hanover-based company has repeatedly said it wants to divest the holding.

TUI Strategy

With the deal reducing its stake, TUI is getting closer to an exit from the container shipping business, CEO Fritz Joussen said in an internal statement obtained by Bloomberg News. TUI has a “binding understanding” with the other Hapag-Lloyd shareholders to list the shipping company next year and has the right to sell stock in a private placement in the run-up to the IPO, Joussen said.

CSAV will buy shares worth 259 million euros in a 370 million-euro capital increase that will boost its stake in Hapag-Lloyd to 34 percent from about 30 percent. The German company will carry out a second sale of new stock for 370 million euros coinciding with the IPO on the German exchange.

Shares in CSAV rose 0.5 percent to 27.7 pesos in Santiago.


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