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Cosco's OOCL buyout 'almost a done deal', but HK carrier says it's not so

CHINA's state-owned Cosco Group is in advanced talks to acquire Hong Kong's Orient Overseas Container Line (OOCL) for at least US$4 billion, the Wall Street Journal reported.

But Seatrade Maritime News said that Orient Overseas International Ltd (OOIL) had again denied media reports that cited sources as saying that China's Cosco Shipping is preparing to acquire its container shipping unit Orient Overseas Container Line (OOCL).

A spokesman from OOIL told Seatrade Maritime News that the company's statement on the matter "has always remained consistent", and reiterated that "the company and OOCL is not aware of, nor is it involved in any bid relating to the company or OOCL".

OOIL stock went up three per cent on the news of the supposed merger early yesterday, but shrunk back to a 1.4 per cent gain at the close as word of the denials spread in the afternoon.

Yet the Wall Street Journal said the deal could be reached as early as July, citing people familiar with the matter. China Cosco Shipping was exploring the possibility of buying OOCL, in January.

Cosco, which has holdings in about 30 ports with annual handling capacity of about 97 million TEU, has been seeking investment opportunities locally and overseas.

An insider source has told London's Loadstar a takeover of the container arm of Tung family-led Orient Overseas International (OOIL) is "almost a done deal".

In January, reports surfaced of a US$4 billion price tag put on the container line by OOIL as the Chinese state-owned line, French carrier CMA CGM and Taiwanese line Evergreen were touted as potential bidders. But this was denied.

Then OOCL joined with Cosco, CMA CGM and Evergreen in the Ocean Alliance and saw year-on-year volumes and revenues improve in the first quarter.

After several mergers in the last few years, OOCL was left with a 3.3 per cent global market share, against Maersk's 19 per cent MSC's 14.7 per cent, CMA CGM's 11.1 per cent and Cosco's 8.3 per cent.

This after Cosco merged with China Shipping, CMA CGM took over Neptune Orient Lines's APL; Hapag-Lloyd merged with UASC while Maersk is acquiring Hamburg Sud.

At the launch of its 21,413-TEU OOCL Hong Kong in Korea last month OOIL chairman CC Tung said that the delivery of the newly crowned biggest containership in the world was an "important" moment.

"Faced with increasing competition and un-ending pressure on costs, we need to take the bold step in operating larger size ships of quality and high efficiency in order to stay relevant and compete effectively as a major container shipping company," he said.

OOIL's shares surged 30 per cent in January on expectations of a deal to sell OOCL, which, said London analyst Drewry Maritime Research, would be a "good buy".