COSCO Likely to Acquire OOCL for $6.3 Billion

COSCO Shipping has paired with Shanghai International Port Group (SIPG) in a consolidated effort to purchase Orient Overseas International Ltd. (OOIL), the holding company overseeing Orient Overseas Container Line (OOCL). The proposed deal would pay OOIL $10.07 per share, which equates to roughly $6.3 billion. If OOIL accepts the offer then COSCO would assume a 90.1 percent ownership stake, while SIPG would acquire the remaining 9.9 percent.

OOIL’s purchase still requires approval from both shareholders and pertinent regulatory bodies before it can be approved. However, the Tung family, the founding members of OOCL and current majority shareholders, have issued an official statement condoning the deal. The offer would be a financial windfall for the Tung’s, but current OOIL staff won’t be left out in the cold either as COSCO/SIPG plan to preserve the existing benefits and structure of OOIL for a minimum of 24 months following completion of the deal. With OOIL’s acceptance of the offer COSCO’s fleet will grow to more than 400 vessels with the capability to handle roughly 2.9 million TEU’s, which would rank COSCO third among carriers in terms of capacity.

The potential acquisition of COSCO comes amid a flurry of carrier mergers and buy-outs that have left the majority of East and West Coast trade controlled by 11 carriers within 3 alliances. The JOC has provided the following breakdown of alliances, “COSCO and OOCL both belong to the OCEAN Alliance, which commenced operations officially on April 1, along with CMA CGM/APL and Evergreen Line; the 2M Alliance consists of Maersk Line and Mediterranean Shipping Co. (MSC), with South Korea’s Hyundai Merchant Marine (HMM) purchasing slots though not a full member; and THE Alliance counts Hapag-Lloyd/UASC, Yang Ming, and the three Japanese carriers as members.” The impending acquisition of OOIL is yet another sign that smaller carriers lack the critical mass to cut costs enough to remain viable.

Shapiro will continue to monitor the situation and will provide relevant updates as they become available.