By BLOOMBERG
Neptune Orient Lines Ltd jumped to the highest level in more than five months in Singapore trading after the company became a takeover target for two of the world’s largest container ship operators.
Shares of Neptune Orient, which gained as much as 8.1% earlier, closed up 1% at S$1.055, the highest price since May 22. The stock has advanced 26% this year, compared with an 11% decline in Singapore’s Straits Times Index.
Neptune Orient, Southeast Asia’s biggest container shipper, said on Saturday it’s in separate preliminary talks with CMA CGM SA and AP Moeller-Maersk A/S on a possible sale of the company.
CMA CGM has made a preliminary offer for Neptune Orient and is conducting due diligence, though it hasn’t been granted exclusivity, while discussions with Maersk are less advanced, people with knowledge of the matter said before Neptune Orient’s announcement.
“Neptune Orient is a good asset,” said Rahul Kapoor, a Singapore-based director at Drewry Maritime Services Pvt Ltd, a shipping research company. Still, “it’s unlikely to turn profitable next year. 2016 could be even worse for the shipping industry.”
Rates decline
Liners including Neptune Orient have been reducing costs, selling assets and cutting employees to stem years of losses as sluggish global commerce and overcapacity eat into shipping rates.
Neptune Orient, which helped cement Singapore’s status as a global trade hub, is attracting takeover interest after simplifying its structure this year by selling its US$1.2 billion (RM5.22 billion) logistics unit.
“Neptune Orient has a duty to assess all options to maximise shareholder value and improve its competitiveness,” Neptune Orient said in a statement. The discussions are preliminary and there’s no assurance that a definitive agreement will be reached, it said.
CMA CGM is in discussions on a “potential combination with Neptune Orient Lines,” the Marseille-based company said on Monday.
Maersk chief executive officer Nils Smedegaard Andersen said before Neptune Orient’s announcement that “we will look at everything that comes up for sale in the market but our base strategy is to grow organically”. Maersk hasn’t commented after the Asian shipping company’s confirmation.
Temasek ownership
A deal is unlikely to be struck soon, as the slumping shipping sector damps appetite for aggressive bidding, two of the people said. Temasek Holdings Pte Ltd, the Singapore state investment company that owns 67% of Neptune Orient, may not be willing to sell its stake at a low price, they said.
Acquiring Neptune Orient would help consolidate CMA CGM’s No 3 position in container shipping as it competes with market leaders Maersk and Mediterranean Shipping Co.
Neptune Orient’s APL container unit has a 2.7% market share, while CMA CGM controls 8.9% of the market, according to data from industry consultant Alphaliner.
Companies are removing vessels on some trade routes to address overcapacity and help lift rates. Still, ships with a combined capacity of about 2.9 million 20-foot containers are due for delivery in 2015 and 2016, and that could mean another three years of overcapacity and financial pain, according to Drewry Shipping Consultants Ltd.
Spot rates to haul a 20-foot container to Europe from Asia fell 32% to US$674 for the week ended Nov 6, according to the Shanghai Shipping Exchange. Rates fell to a four-month low of US$233 a box last month.
— By Kyunghee Park
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