France’s CMA CGM, the world’s third-largest container shipping firm, made on Monday a S$3.4 billion ($2.43 billion) offer to buy Singapore’s Neptune Orient Lines (NEPS.SI) to expand its presence on trans-Pacific routes.
CMA CGM offered S$1.30 a share in cash, 6% above NOL’s last closing price on the stock exchange. Temasek, which owns a nearly 67% stake in NOL, accepted the offer and will tender all of its shares, CMA CGM and NOL said in a joint statement.
NOL has struggled due to a prolonged downturn in the global shipping market, posting four consecutive years of losses. Overcapacity, slower economic growth and weak commodity prices could put smaller shipping firms at risk, and consolidation is highly likely among the larger ones, ratings agency Fitch said in a report last week.
“With few others having the resources or inclination, we suspect that this is not just the best offer for NOL stock but the only one,” Credit Suisse analysts wrote in a report on Monday.
CMA CGM’s offer closes the chapter on a difficult investment for Temasek. The state investor paid S$2.80 a share in 2004 when it increased its stake in NOL from 29% to 68% then.
CMA CGM will make a mandatory cash offer for the remaining shares from minority shareholders that include BlackRock.
NOL’s share price has already risen about 45% so far this year, buoyed by the company’s plans to shed assets.
Earlier this year, NOL sold its logistics business for $1.2 billion to Japanese freight carrier Kintetsu World Express Inc.
CMA CGM’s acquisition of NOL would be Singapore’s biggest inbound deal since 2013 when companies linked to Thai tycoon Charoen Sirivadhanabhakdi completed an $11 billion deal to buy conglomerate Fraser and Neave.
NOL’s APL unit is the world’s 13th-biggest in terms of capacity, and combining it with CMA would create a fleet of 2.33 million twenty foot equivalent unit (TEU) with an 11.5% global capacity share, based on figures from industry analysts Alphaliner.
CMA CGM said the deal will further reinforce its global position with combined revenue of $22 billion and 563 vessels.
The deal would not change CMA CGM’s global ranking but would enable the combined entity to dominate the trans-Pacific lanes with a 12% share, ahead of the 9% of global leader AP Moeller-Maersk’s Maersk Line, Credit Suisse analyst Timothy Ross said last month.
But CMA CGM, which has $5 billion of debts, will be burdened by NOL’s debts of $2.9 billion. CMA CGM, which itself is taking a bank loan to finance the deal, said on Monday it plans to sell assets over the next 18 to 24 months to cut its debt.
CMA CGM was advised by BNP Paribas, HSBC, and JPMorgan. Citigroup advised NOL.