Analysis: just where, and on whom, will APMM's M&A gaze settle?
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One of Hapag-Lloyd’s largest shareholders has brushed off an approach by CMA CGM for merger talks.
Any such deal could create the largest container shipping line in the world.
Alphaliner reports that, on the side lines of the company’s AGM in Hamburg yesterday, Hapag-Lloyd 21.4% shareholder Klaus Michael Kuehne confirmed the approach had been made.
Mr Kuehne began investing in the German carrier in 2008 as a “white knight”, purchasing shares from owner TUI to support the company’s Hamburg base and see off a potential bid from rival carrier NOL.
However, the logistics entrepreneur has apparently rejected the French approach, saying “Hapag-Lloyd would rather take over CMA CGM”.
And in an interview with German radio station NDR, Mr Kuehne added: “I am not worried. [CMA CGM] approached me and made several attempts to negotiate, but we found that the proposal made no sense. We do not want it.”
However, shares in Hapag-Lloyd, which had dropped sharply after the carrier issued a profit warning on 29 June, reacted positively to merger speculation, initially gaining 11% as investors hungered for more consolidation in the industry.
Meanwhile, at the AGM, chief executive Rolf Habben Jensen advised shareholders that the market environment remained “challenging”.
He said: “Freight rates are under pressure from increased ship deliveries in the first half of this year and, with bunker costs and charter rates on the increase, we have short-term pressure on the cost side that has not been matched in the form of increased rates to our customers.”
Nevertheless, he added, “we are currently seeing a positive trend”, which he anticipated “should be further consolidated in the second half of the year”.
Mr Habben Jensen also said Hapag-Lloyd needed to “secure a competitive cost structure” and become “even more efficient”, identifying key areas of “short-term measures” he said would offer “some relief on the cost side”.
These include optimising networks, managing purchasing costs more consistently and reviewing terminal contracts. Given the large sums of money involved, “small percentage savings can have a significant impact on earnings”, he said.
“We will also take advantage of the opportunities that emerge from digitisation and offer our customers even better services and new digital products,” said Mr Habben Jensen.
On the subject of the forthcoming IMO 2020 0.5% sulphur cap regulations, Mr Habben Jensen was keen not to spook shareholders by repeating earlier views that he was not in favour of installing scrubber systems that would allow Hapag-Lloyd vessels to continue to bunker with cheaper higher sulphur content fuel after 1 January 2020.
Several liner competitors, including MSC, HMM and Evergreen, are opting for scrubbers on newbuilds and some are having the exhaust gas cleaning systems retrofitted on their existing ships.
Mr Habben Jensen said Hapag-Lloyd was working for “practical solutions”, which he suggested could mean the carrier’s fleet post-2020 could be powered by a combination of scrubbers, LNG and low-sulphur fuel.
He added that the carrier was evaluating “all available options” on its future strategy for marine fuels and three pilot projects were ongoing.
Tomorrow: our financial columnist will review the container line positions