CMA CGM to Acquire NOL

The proposed cash acquisition of NOL at SGD 1.30 per NOL share, represents a 49% premium to NOL’s unaffected share price. Strategic acquisition resulting in combined turnover of USD 22 billion and fleet size of 563 vessels.

 
CMA CGM, a global leader in container shipping, today announces a pre-conditional voluntary general cash offer for Neptune Orient Lines (NOL), Southeast Asia’s largest container shipping company (SGX: N03), subject to the satisfaction of the pre-conditions specified in such announcement. NOL’s majority shareholders (Temasek and its affiliates) have irrevocably undertaken to tender all of their shares in acceptance of the Offer.

Upon the satisfaction of the pre-conditions (namely, approvals from antitrust authorities), CMA CGM will launch an offer at a price of SGD 1.30 per share, which represents a 49% premium to NOL’s unaffected share price1 and a 33% premium1 to NOL’s 3 month volume-weighted average share price to July 16, 2015.
 
Commenting on this transaction, Rodolphe Saadé, Vice-Chairman of CMA CGM, said: “This transaction will represent a significant milestone in the development of CMA CGM. Leveraging the complementary strengths of both companies, CMA CGM will further reinforce its position as a leader in global shipping with combined revenue of USD 22 billion2 and 563 vessels. By bringing together the know-how of both teams, the enlarged group will be even better positioned to provide premium services to its customers across all markets. At a time when the shipping industry is facing strong headwinds, scale is more critical than ever to capitalize on synergies and capture growth opportunities wherever they arise. I firmly believe CMA CGM will enable NOL to address the industry’s new challenges. We recognise the strategic importance of Singapore as a key hub for the maritime industry and we are committed to reinforcing its regional leadership.”
 
Ng Yat Chung, CEO of NOL, said: “The combined market presence delivered by the transaction would achieve the scale needed to enhance competitiveness for NOL’s operations and offer a clear and sustainable long term direction for the combined entity. The transaction would enable NOL to grow as part of a larger entity with the resources of the world’s third largest container shipping line.”
Tan Chong Lee, Head Portfolio Management at Temasek, said: “We are supportive of this transaction as it presents NOL with an opportunity to join a leading player with an extensive global presence and solid operational track record. The combination of NOL and CMA CGM will create a leading shipping company that delivers reliable and efficient service to its customers. Their complementary strengths will yield mutually beneficial results. We also note and welcome the commitment of CMA CGM to enhance Singapore’s position as a key maritime hub and grow Singapore’s container throughput volumes.”
 
Created in 1978 by Jacques Saadé, CMA CGM is the world’s third largest container shipping firm, with 469 vessels and a global market share of 8.8%. In 2014, the Group handled over 12 million TEUs and generated USD 16.74 billion in revenues. A founding member of the Ocean Three Alliance with UASC and CSCL, CMA CGM is present across 160 countries, with 22,000 employees in 655 offices, and has a fleet capacity of 1,781 thousand TEUs.

 

NOL operates under the American President Lines (APL) brand. In 2014, the company’s revenues reached USD 7.04 billion. Currently, NOL has more than 7,400 employees in 180 offices across more than 80 countries and operates 94 vessels, representing 618 thousand TEUs in fleet capacity.
 
This acquisition would enable CMA CGM to reinforce its position in the container shipping industry, and achieve the following:

• capacity of 2,399 thousand TEUs and combined fleet of 563 vessels
  
• market share of approximately 11.5% (vs 8.8% for CMA CGM and 2.7% for NOL) 
  
• combined turnover of c. USD 22 billion.

 
CMA CGM has a leading position on the Asia-Europe, Asia-Mediterranean, Africa and Latin America routes, whilst APL is strong along the Transpacific, Intra-Asia and Indian subcontinent shipping routes. The enlarged entity will strengthen its position on strategic shipping routes, especially in key markets such as United States, Intra-Asia and Japan, and will boast a balanced trade portfolio. Following the transaction, the combined group would hold market shares from 7% to 19% on the routes on which it operates.
  
Creating scale to enhance competitiveness
The industry is currently facing significant challenges with strong pressure on capacity and pricing. In this context, companies need to enlarge their reach and coverage in order to benefit from economies of scale and deliver the full range of services to their customers. In order to deliver sustainable performances in the mid-term, scale provides a strategic advantage.
 
The combination of the two groups would create synergies and enable the following competitive advantages:

• the optimization of vessels and occupancy rates on routes
• economies of scale in terms of purchasing costs, logistics costs and chartering costs
• a larger and more flexible fleet, allowing to deploy the most efficient vessels on any given route

Overall, the trade portfolio of the combined group would be better balanced, with increased resilience in times of market volatility. CMA CGM has substantial experience in the integration of businesses and expects the enlarged entity to achieve significant operational synergies.
 
Commitment to Singapore: Reinforcing Singapore’s leadership in the maritime and shipping industry
CMA CGM attaches significant importance to Singapore and the region for the deployment of its strategy in Asia. The combined entity would reinforce Singapore’s leadership in the maritime and shipping sector as the city-state seeks to increase maritime services and transportation volumes, including committing more volumes through Singapore. CMA CGM will also contribute to reinforce Singapore as a center of excellence in the field of maritime activities as CMA CGM plans to use Singapore as a key hub in Asia. In this regard, CMA CGM plans to establish its regional head office in Singapore. This consolidation of CMA CGM’s longstanding presence in Asia in Singapore aims at providing efficient and quality services to customers in the region. Following this transaction, CMA CGM intends to further leverage NOL’s historic legacy and reinforce its presence in Singapore.
 
Details of the transaction
The transaction is valuing NOL at a price to book ratio of 0.96 times. The transaction will be financed by a combination of available cash and bank financing provided by a syndicate of international banks.
Post-closing, CMA CGM intends to deleverage its balance sheet within 18 to 24 months through synergies and assets sales for an amount of at least USD 1 billion, with the aim to reduce debt gearing ratio to below 0.8 times.

 

The boards of NOL and CMA CGM have unanimously approved the terms of the proposed transaction, which is still subject to the approval of the relevant anti-trust authorities as set out in the Pre-Conditional Offer Announcement. The offer will be launched without delay after approval of the relevant authorities which is expected by mid-2016.