Wednesday, September 24, 2008

NOL to Bid for Hapag-Lloyd

Neptune Orient Lines will definitely bid for Hapag-Lloyd, the chief executive of the Singapore-based ocean carrier said.

Ron Widdows, who in late August expressed doubts about buying the world's fifth-largest liner operator, told Welt am Sonntag, the German Sunday newspaper, he would make a binding offer by the Sept. 26 deadline set by Hapag-Lloyd parent TUI AG. "Something dramatic would have to happen that we don't do that," he said.

But Widdows said he has "a gut feeling" there is only a 50-50 chance TUI, Europe's biggest tourism group, will sell Hapag-Lloyd.

Widdows said NOL, parent of APL, would present a better economic case for acquiring Hapag-Lloyd than a rival bid by a consortium of Hamburg investors, the only other bidders for the carrier. Previously, Widdows said NOL has not definitely decided to make a bid as the deteriorating market environment had raised the risks involved in an acquisition.
The Hamburg investors have secured financing for a "relatively high strategic price", Klaus-Michael Kuehne, the billionaire chief shareholder of forwarder Kuehne & Nagel and a member of the consortium, told the Frankfurter Allgemeine Sonntagszeitung.

Neptune Orient Lines has emerged as the odds-on favorite to acquire Hapag-Lloyd, German analysts say, thanks to synergies the Hamburg investors can't realize. Combining NOL and Hapag-Lloyd would create the world's third-largest ocean carrier.
The recent strength of the dollar against the euro also has tipped the balance in favor of NOL by as much as $300-350 million, according to analysts quoted in the German media.

Widdows dismissed claims NOL would cut Hapag-Lloyd jobs in Germany and at its overseas offices and quit its home port of Hamburg as "nonsense".

"Germany is the most important market for NOL", accounting for a fifth of its European cargo volume, he told Welt am Sonntag. "Our business will grow in Hamburg…it doesn't matter if we grow alone as NOL or together with Hapag-Lloyd." The NOL executive met with German deputy economic minister Dagmar Woehrl last week, reportedly to defuse tensions over the likely sale of Hapag-Lloyd, Germany's biggest shipping line, to a foreign company.

And TUI, which values Hapag-Lloyd at 3.5 billion euros [$4.9 billion], has said it will not sell the carrier unless it gets an acceptable price, said to be a minimum of 4 billion euros [$5.7 billion].

Analysts had predicted Hapag-Lloyd would fetch as much as 4-5 billion euros when TUI put it up for sale in the spring but the slide in ocean freight rates and slowing world trade growth have prompted them to lower their estimates.

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