Why does CMA CGM wants to buy NOL?

07/06/20160 CommentsSEO SEO
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Since December 2015 world’s third largest container shipping company CMA CMG made an offer of $2.4 Billion to acquire Neptune Orient Lines Limited (NOL) the largest SouthEast Asia’s container shipping company.

The deal would allow the French company to consolidate its market position in strategic shipping routes like the Transpacific, Intra-Asia and Indian subcontinent. The new fleet of 563 vessels would have a capacity of 2.35 thousand TEU’s and a market share of 11.5%.

Offering all aspects of global transportation, NOL and its core business APL is the largest shipping line listed on the Singapore’s exchange.

On its 2015 Annual Report, NOL’s chairman Kwa Chong Seng justified NOL’s sale. Given the poor macroeconomic conditions, the acquisition of NOL by CMA CGM comes at the right time: The combination of a weak demand growth with overcapacity and the drop of freight rates has led to a disappointing forecast for the Singapore-based company.

“To get back to sustainable growth and profitability on its own, NOL needs to achieve a better cost position through greater economies of scale. This would require significant additional equity investment at a time when returns in the industry are weak,” said NOL’s chairman.

The CEO also explained that the decision was made after a thorough consideration and with the vision of improving NOL’s core liner business.

On 2015 APL carried 13% less volume and its revenue fell 24% to US$5.4 Billion. The company keeps its focus on saving costs at all levels by reducing fuel consumption, increasing productivity and vessel operations.

[caption id="attachment_4451" align="aligncenter" width="963"] APL key numbers on 2015 Annual Report[/caption]

According to the Wall Street Journal, if consummated, the deal would rank as the biggest shipping consolidation since 2005, when the Danish shipping conglomerate A.P Möller-Maersk acquired P&O Nedlloyd for about $3 billion.

Here is an infographic that sums up everything you need to know about CMA CGM- NOL merger:  Sources:http://www.mundomaritimo.net/noticias/cma-cgm-confirms-takeover-of-nolhttps://www.nol.com.sg/wps/wcm/connect/a655b534-c9d4-490e-bff0-531c3dcf1217/Full+Annual+Report+2015.pdf?MOD=AJPEREShttp://www.wsj.com/articles/french-shipper-cma-cgm-to-make-offer-to-buy-neptune-orient-lines-1449454066
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