Will container shipping company, OOCL, be acquired?

6 February 2017

With all of the takeovers and alliances occurring in the world of container shipping, everything is changing quickly. Rumours are now circulating that container shipping company, OOCL could possibly be acquired. As a result, the company’s shares already went up by 30% in January. Although rumours are being denied by all stakeholders, the speculation is still being taken seriously by investors.

Why would OOCL like to merge?

OOCL is currently in a difficult position. With a market share of less than 3%, it takes 8th place on the world rankings. As a result, it is difficult for the company to compete. The falling market share is the result of recent mergers between container shipping companies. As part of this, CMA CMG has taken over NOL and China Cosco Shipping bought the China Shipping Group. These are only two examples from a long list.

A second reason for OOCL to merge, is to improve the financial situation at the company. As one of a few companies, they almost always booked good profits over the past 10 years. This makes OOCL an attractive partner for mergers or acquisitions. An acquisition will reportedly earn the owners around $4.7 billion.

Multiple companies interested in OOCL

There are several container shipping lines that could possibly take over OOCL. The foremost being CMA CMG. It’s being said that they have enough financial resources to take over the business. Another advantage here is that the composition of the Ocean Alliance would not need to change. OOCL is actually a member of this alliance, as is CMA CMG. The Ocean Alliance was formed last year and will be effective from April 1, 2017.

Evergreen and China Cosco Shipping are also known to be interested in an acquisition. These two companies also form part of the Ocean Alliance. However, for both of them, it is unknown as to whether they have the financial resources to do so. In fact, Evergreen would profit most from an acquisition of OOCL. In this way, their market share would grow to 7.5%. This argument applies to a lesser extent for CMA CMG and China Cosco Shipping, as they have much larger container fleets.

Impact on importers and shipping companies

An acquisition of OOCL has implications for importers. The choice becomes further limited for shipments, as competition decreases. This could result in higher prices.

The mergers are in the companies’ favour. In the current container shipping landscape, container fleet volume is very important. By merging, costs can be saved and a company can better compete. In this way, the financial position will improve for container shipping companies who´s financial position is in some cases, unfavourable.