China’s COSCO Shipping Corporation and Hong Kong-listed shipping-to-property firm Orient Overseas International (OOIL) Ltd (0316.HK) on Friday threw cold water on reports that the two were in talks over a deal for OOIL’s subsidiary OOCL. Rumors about a deal for OOCL have grown over recent months, amid market consolidation and shake-up as the industry struggles to recover from a slump in freight rates linked to a glut of ships and slowing Chinese economic growth.
On Wednesday, Chinese business newspaper Caixin, citing sources, reported that China COSCO Shipping would participate in bidding for OOCL alongside Evergreen Marine Corp (2603.TW) and France’s CMA CGM [CMACG.UL]. “The company wishes to clarify that the company and OOCL is not aware of, nor is it involved in any bid relating to the company or OOCL,” OOIL said in a statement on Friday.
A COSCO Shipping spokeswoman told Reuters separately that the rumors were “incorrect”. A series of mergers and acquisitions in container shipping has left the top six shipping lines controlling 63 percent of the market. OOCL has a 2.7 percent slice of the market, while Evergreen has a 4.8 percent share. CMA CGM and Evergreen also dismissed the reports. “We did not bid for OOCL. It’s a market rumor,” said Golden Kou, an Evergreen vice president. A spokesman for CMA CGM said the firm did not comment on market rumors. Shares in closely-held OOIL, buoyed earlier in the week by news of a potential deal, were down almost 10 percent on Friday.
FAMILY BUSINESS
Analysts say OOCL is an attractive bid target, due to its long profitable history and relatively low leverage. OOCL was founded in 1969 by Hong Kong shipping magnate Tung Chao-yung, whose son, Tung Chee-chen is chairman, president and chief executive of the company, while several Tung children are in senior management roles.
This strong position, though, also means the owners have little reason to sell. “With the family members apparently committed to the business and loads of cash in the bank, why should the situation change?” said Martin Rowe, managing director of shipping services firm Clarkson Platou Asia Hong Kong. Jefferies analyst Andrew Lee added industry pressures for mergers had also probably eased, as the container shipping market appeared to hit a bottom last year.
“Now that things have improved, there’s no real urgency,” he said. “In a rising environment, getting back to breakeven levels, obviously they’re not as desperate to sell.” OOCL, COSCO Shipping, CMA CGM and Evergreen are all part of the “Ocean Alliance” partnership, formed last year to take on the rival grouping of Maersk Line and Mediterranean Shipping. The Ocean Alliance will formally start in April after current alliances expire.
(Reporting by Adam Jourdan and Brenda Goh; Additional Reporting by Faith Hung in TAIPEI and Keith Wallis in SINGAPORE; Editing by Clarence Fernandez)
Via Reuters, by Brenda Goh and Adam Jourdan | SHANGHAI
