Germany's Hapag-Lloyd to merge with Dubai's United Arab Shipping Company

Germany's Hapag-Lloyd AG yesterday agreed to a merger with Dubai's United Arab Shipping Company (UASC), in order to create the world's fifth-largest container shipping line with an estimated value of €8.2 billion ($9 billion).

UASC shareholders are expected to vote today at an extraordinary general meeting to grant their approval to the merger.

Based on valuations, Hapag shareholders would hold 72 per cent of the combined company, with the rest being held by the privately-held owners of UASC.

UASC is owned by several Middle East sovereign wealth funds, including Qatar Investment Authority, which holds 51 per cent, Saudi Arabia's Public Investment Fund holds 36 per cent, while Kuwait and United Arab Emirates hold minority stakes.

It has 200 million shares issued in Egypt, and has a market capitalization of 144 million Egyptian pounds ($16.3 million).

Hapag-Lloyd, the world's sixth-biggest container operator, has a fleet of 175 vessels, while UASC is the tenth-biggest, has 55 vessels.

The merged company would have a fleet of around 230 vessels with a capacity of around 1.5 million twenty-foot equivalent units and hold a 7.4 per cent global market share.

The merged company will join The Alliance of Hanjin Shipping, Hapag-Lloyd, ''K'' Line, MOL, NYK Line and Yang Ming Line.

The Alliance would benefit from UASC's fleet of mega-ships, which would increase its competitiveness on major east-west trades.

The Alliance partners include Japan's Kawasaki Kisen Kaisha Ltd., Mitsui OSK Lines Ltd., Nippon Yusen KK, South Korea's Hanjin Shipping Co. and Taiwan's Yang Ming Marine Transport Corp and Hapag-Lloyd.

The Alliance controls 18 per cent of the world's container shipping fleet with more than 620 vessels and a combined capacity of 3.5 million standard twenty-foot containers, or TEU.

The merger is part of a consolidation wave in the industry, which is suffering from low rates, shipping overcapacity and weak consumer demand.