SINGAPORE (REUTERS) - Singapore state investor Temasek Holdings' planned sale of shipper Neptune Orient Lines (NOL) offers potential buyers a modern fleet at a comparative bargain price expected to be around US$2 billion, industry and banking sources said.
The catch? The asset has lost more than US$1 billion in four years and may be on the block at a time when the global container shipping industry is in the grip of a severe prolonged downturn. The global sector's debt has nearly doubled to US$86 billion over the past decade, said Rahul Kapoor, Singapore director of Drewry Equity Research, with spot Asia to Europe and transpacific container freight rates near six-year lows.
Still, industry sources say NOL's new ships and 2.8 per cent slice of the global container shipping business can be expected to appeal to players seeking an edge over rivals. Qatar-controlled United Arab Shipping Company (UASC) can be expected to join the likes of Germany's Hapag-Lloyd AG and Hamburg Sud in running the rule over NOL, these people said.
Temasek, with nearly US$200 billion in assets, recently hired Citigroup to seek buyers for the majority stake in NOL it bought in 2004 for $2.8 billion, the people added, triggering the sale of the whole firm under Singapore rules. NOL has made losses in five of the past six years, but the bank's task may have become a tad easier after the shipper said on Thursday it eked out a tiny net profit in April-June after six straight quarters of losses.
Buyers would need to offer at least 30 per cent more than NOL's current market value of about $1.8 billion - the usual premium paid to acquire a publicly traded company, bankers said. Both Citi and Temasek declined comment.
"UASC now has much wider options since the Qataris took control, and the Qataris want to be world-class in everything they touch," said a Hong Kong-based structured asset banker involved in shipping and transportation deals.
UASC, Hapag-Lloyd and Hamburg Sud all declined to comment.
"The company has a duty to consider all options to maximise shareholder value. Hypothetically if I receive a good price for the business, we will always consider selling," said NOL Chief Executive Officer Ng Yat Chung, speaking after Thursday's results. "What I can say now is that the company is totally focused on returning the liner business into profitability," he said.
In line with that commitment, it sold its only profitable logistics division for US$1.2 billion this year.
Boosting NOL's appeal is the fact that a buyer would gain a young fleet for around half the cost of new vessels, said Andy Lane, a partner at Singapore's CTI Consultancy.
"My favourite motivation for the buy remains fleet renewal," said Mr Lane. "There is global overcapacity, but shippers also need to keep their fleets right-sized, flexible and young."