Cosco Shipping Holdings said on Sunday that it offered to buy Orient Overseas International for $6.3 billion in cash, creating the world's third-largest container-shipping company as the industry shrinks after years of losses and overcapacity. The Tung family, which controls Orient Overseas, has accepted the offer that still needs regulatory approvals and consent from Cosco's investors.
COSCO will end up with a fleet of more than 400 vessels and capacity exceeding 2.9 million TEUs. It is now the fourth-largest behind France's CMA CGM.
"COSCO Shipping Holdings believes this acquisition will enable both COSCO Shipping Lines and OOIL to realize synergies, enhance profitability and achieve sustainable growth in the long term", COSCO said in the statement.
"Our company remains committed to enhancing Hong Kong as an global shipping center".
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COPYRIGHT VIOLATION NOTICE: This report was first published by Markets Daily and is the property of of Markets Daily. The average 12 month price objective among brokers that have issued ratings on the stock in the past year is C$8.39.
"This looks like a happy ending for both parties", said Han Ning, China director for Drewry Shipping Consultants Ltd. "Cosco can benefit from OOCL's strong presence on routes from the Far East to Australia and to the US The company's operational efficiency has always been admired by outsiders as well". Shares in the firm, which flagged a return to first-half profit last week, have been suspended since May 16. The deal is subject to anti-trust reviews by Chinese and US government authorities.
Both companies said they would not terminate any OOIL employee following the deal's closing "for at least 24 months".
UBS AG Hong Kong Branch is advising COSCO Shipping and SIPG, while J.P. Morgan Securities (Asia Pacific) Limited is advising OOIL.
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