Singapore shipping company Neptune seeks $5 loan to buy German firm

23 Jun 2008

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According to latest reports, the world's eighth container shipping firm  Neptune Orient Lines Ltd. (NOL), is seeking to borrow at least $5 billion for a potential bid to buy German tourism group TUI AG's sea-cargo unit Hapag-Lloyd, the latter being valued at approximately $7- 8 billion and the fifth-largest in the world by carrying capacity.

Talks for a loan come as TUI CEO Michael Frenzel tours Asia to market Hapag-Lloyd, which the German group has put up for sale and NOL is considered a likely bidder. Among the other interested parties that Frenzel is scheduled to meet are Hong Kong-based Orient Overseas and Toyo-based Nippon Yusen.

NOL, which is two-thirds owned by the Singapore sovereign wealth fund Temasek Holdings Pte, is reportedly in talks with three local banks DBS Group, Oversea-Chinese Banking Corp and United Overseas Bank, as well as with some foreign players for the loan. NOL's container shipping line operates under the name APL, which earlier stood for American President Lines.

Neptune will also be competing with Alecta, a Swedish pension fund, M.M. Warburg & Co., the German city-state of Hamburg and billionaire Klaus-Michael Kuehne for the acquisition. Hamburg's government said in April that the port city might consider buying the shipping line to protect jobs.

A tie-up between NOL and Hapag- Lloyd will create a container shipping behemoth, with the capacity to carry more than 880,000 twenty-foot equivalent (TEU) boxes. The combination of the current No.5 and No.8 in the business will be No.3 in the new rankings, just behind Maersk Line, the shipping division of AP Moeller-Maersk A/S, and Mediterranean Shipping Co.

TUI is forecasting an almost 70 per cent increase in 2008 earnings at Hapag-Lloyd. Its adjusted full-year earnings before interest, taxes, depreciation and amortization are expected to reach $788 million, as revenue climbs 20 per cent to $9.7 billion. For 2010, Hapag-Lloyd's adjusted EBITDA is expected to rise to $1.3 billion on sales of $11.7 billion.

Top 10 container shipping companies in order of TEU capacity, first January 2006
Company TEU capacity Market Share Number of ships
AP Moeller-Maersk Group 1,665,272 18.2 per cent 549
Mediterranean Shipping Company S.A. 1,250,000 11.7 per cent 376
CMA CGM 507,954 5.6 per cent 256
Evergreen Marine Corporation 477,911 5.2 per cent 153
Hapag-Lloyd 412,344 4.5 per cent 140
China Shipping Container Lines 346,493 3.8 per cent 111
Hanjin-Senator 331,437 3.6 per cent 145
APL 328,794 3.6 per cent 99
COSCO 322,326 3.5 per cent 118
NYK Line 302,213 3.3 per cent 105

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