Maersk to pay $5.6b for German rival Hamburg Sud

Container ship Caroline Maersk, docked at a Mexico terminal. The planned merger with Hamburg Sud will strengthen Maersk's trade presence in Latin America, where the German firm is well established.
Container ship Caroline Maersk, docked at a Mexico terminal. The planned merger with Hamburg Sud will strengthen Maersk's trade presence in Latin America, where the German firm is well established.PHOTO: AGENCE FRANCE-PRESSE

COPENHAGEN • The world's biggest container shipping company Maersk Line will pay €3.7 billion (S$5.6 billion) for its acquisition of smaller German rival Hamburg Sud, it said yesterday.

Combined, the two firms will be able to realise annual operational savings of about US$350 million to US$400 million (S$488 million to S$558 million), Maersk Line said in a statement, fleshing out details on the deal announced in December.

"By keeping Hamburg Sud as a separate and well-run company, we will limit the transaction and integration risks and costs while still extracting the operational synergies," said Mr Soren Skou, chief executive officer of both Maersk Line and its parent AP Moller-Maersk Group.

The boards of Maersk Line and the Oetker Group, owner of Hamburg Sud, yesterday approved the proposed deal, which has been given the green light by the European Commission and the United States Department of Justice.

"Maersk paid a significant amount for Hamburg Sud, but considering the wave of consolidation in the industry ... you do not get anything cheaply," Sydbank analyst Morten Imsgard said.

The proposed acquisition will still need approval from the regulatory authorities in countries such as Brazil, China and South Korea, a Maersk spokesman told Reuters, adding that the company expects to secure these by December or early next year. "Integration does not start until we have all approvals," he said.

The proposed merger will strengthen the Danish company's presence in global trade, particularly in Latin America, where Hamburg Sud has long been established. "The job is now to realise those synergy effects, and integrating shipping companies is not without obstacles," Mr Imsgaard said, referring to past acquisitions that have resulted in a loss of market share in some areas.

Maersk is also in the process of spinning off its energy division, either by seeking alliances or a listing, to focus more sharply on its transport division.

Maersk Line expects the Hamburg Sud transaction to close by the end of the year.

REUTERS

A version of this article appeared in the print edition of The Straits Times on April 29, 2017, with the headline 'Maersk to pay $5.6b for German rival Hamburg Sud'. Print Edition | Subscribe