A merger between the German container shipping companies Hapag-Lloyd and Hamburg Süd is seen as positive by some analysts for both shippers and the two companies.
The two companies released a brief statement on Tuesday saying they were “investigating if, and under what conditions, a merger of both companies would be of interest.”
“I think it would be a great move, a great message for shippers and all the vendors,” said Rudy Mack, whose tenure as president of Hapag-Lloyd America from 1999 to 2007 capped 35 years with the company.
Speaking from Hamburg, where both companies are headquartered, he said a combination of the two firms has been talked about on and off for some 20 years, and “has always been a good combination.”
Mack, who today is a consultant, said the purchase of CP Ships in 2005 by Hapag-Lloyd’s then-parent company TUI AG and merger of the two shipping companies “was the second best solution—the best solution… was always Hamburg-Süd.”
A merger would allow them to offer service that was “even more global” and “the cost savings the two companies could achieve would also be beneficial for the survival of the two companies,” he said.
It’s not clear where the impetus for the latest discussions is coming from, though Klaus-Michael Kuehne, honorary chairman of forwarder Kuehne+Nagel and the largest investor in Hapag-Lloyd, told Germany's Wirtschaftswoche magazine earlier this year
that he believed Hamburg Süd, would be an ideal merger partner for Hapag-Lloyd.
“We think it would be a sound move,” said Simon Heaney, research manager at Drewry, adding the two firms are operationally complementary. “But gauging the likelyhood of whether it is going to happen or not is very difficult,” he said.
The fact that both companies made public disclosure that they are holding discussions means “both parties are fairly serious about this, but you must remember this is not the first time they have flirted with each other and nothing happened in the past,” Heaney said.
The companies had talks a combination in 1997, but he said they broke down because of “who is going to have ultimate control.”
He also said it is difficult to determine which company would most benefit from a merger given that Hamburg-Süd is owned by a private company, the Oetker Group, which also has interests in the food, beverage, and banking industries.
Heaney noted Hapag-Lloyd, as a major player in the East-West container trades, has suffered from the downturn in shipping rates with the rest of the industry, “but comparatively they have held up fairly well. They have been one of the better performers towards the top rank. They are by no means a basket case.”
And while publicly available financial information is not available on Hamburg-Süd, he said the company is likely to have benefited from its heavy involvement in the South American trade.
Michael Webber, senior analyst with Wells Fargo Securities, noted merger and acquisition activity in the container liner sector "has been relatively limited recently, although carriers have consolidated some operations through alliances (most notably on Asia-Europe routes last year). While the announcement appears relatively preliminary in nature, we would view consolidation in general as a modest positive for the industry, largely due to the potential improvements in balance sheets and counterparty risk (which is already relatively low).
"However, we note that increased operating efficiencies could cut down (to a degree) the need for incremental third party capacity (containerships and, to a lesser degree, boxes). We believe the situation warrants monitoring, and could get more of a focus in 2013, particularly as overcapacity and softer topline demand have kept valuations in check," Webber said. - Chris Dupin