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NOL confirms takeover talks with CMA CGM and Maersk

Monday, November 9, 2015 - 05:50
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A truck transports a shipping container from APL Ltd., a subsidiary of Neptune Orient Lines Ltd. (NOL), at the port in Singapore, on Friday, Mar 19, 2010.

Singapore

CONTAINER shipping company Neptune Orient Lines (NOL) has officially confirmed that it is a takeover target of two separate companies: French shipping company CMA CGM and Danish conglomerate AP Moeller-Maersk.

NOL said in an announcement on Saturday evening that it was in preliminary talks with the two "with respect to a potential acquisition of NOL".

"There is no assurance that any such discussions will result in any definitive agreement or transaction, or that any offer for NOL will be made or as to the terms on which any such offer might be made," it said.

NOL said it has a duty to assess all options to maximise shareholder value and improve its competitiveness.

"From time to time, NOL enters into discussions on possible combinations involving NOL, while remaining focused on returning its core liner business to sustainable growth and profitability," it said.

NOL, which was founded in 1968 as Singapore's national shipping line, operates under the brand name APL, a major shipping company it merged with in 1997.

NOL is two-thirds owned by the Singapore Government investment company Temasek Holdings. Saturday's announcement marked the first time NOL has commented on a possible sale of its core container shipping business. It comes after the February sale of its profitable logistics business, APL Logistics, for US$1.2 billion.

Despite cost-saving programmes, NOL has struggled to turn a profit in the years after 2010. Net losses for 2011-14 totalled US$1.2 billion, while free cash flow was negative US$4 billion.

Shipping companies worldwide have been battered by the global slump in trade, too many ships around, falling freight rates and, until recently, high fuel costs.

In a note on Nov 1, broker CIMB Research said Temasek might have put APL up for sale because its market share in its core transpacific trade route has declined in recent years.

The company reported a set of dismal third-quarter results, with net losses of US$96 million for continuing operations - much wider than net losses from continuing operations of US$52 million a year ago. Freight rates plummeted at an average rate of 21 per cent, while volumes fell 11 per cent. CIMB added that CMA CGM had apparently bid S$1.50 a share for NOL, which was reportedly rejected by Temasek.

Talks with Maersk were reportedly less advanced than those with CMA CGM.

Citing unnamed sources, a Bloomberg story on Saturday added that a deal was unlikely to be struck soon as aggressive bids might not be made in a slumping shipping sector.

Last Friday, NOL added 6.5 cents to close at S$1.045, up 6.6 per cent, making its market value S$2.7 billion before the announcement.

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