Maersk Line to pay S$5.5 billion for German rival Hamburg Sud

Combined, Maersk Line and Hamburg Sud will be able to realise annual operational savings of about S$489 million to S$558 million.
Combined, Maersk Line and Hamburg Sud will be able to realise annual operational savings of about S$489 million to S$558 million. PHOTO: REUTERS

COPENHAGEN (REUTERS) - The world's biggest container shipping company Maersk Line will pay 3.7 billion euros (S$5.5 billion) for its acquisition of smaller German rival Hamburg Sud, it said on Friday (April 28).

Combined, the two companies will be able to realise annual operational savings of about US$350 million (S$489 million) to US$400 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 Soren Skou, CEO of both Maersk Line and its parent AP Moller-Maersk Group.

The boards of Maersk Line and the Oetker Group, owner of Hamburg Sud, on Friday approved the proposed deal, which has been given the green light by the European Commission and the US 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, adding that the final price was just within his highest estimate.

The proposed acquisition will still need approval from 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 2018.

"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 been long established. "The job is now to realise those synergy effects, and integrating shipping companies is not without obstacles," Imsgard 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.