More ocean carrier consolidation looms as CGM makes offer to buy NOL

In a much-anticipated move, CMA CGM announced a pre-conditional voluntary general cash offer for Neptune Orient Lines (NOL). Upon the satisfaction of the pre-conditions (namely, approvals from antitrust authorities), CMA CGM will launch an offer, the company said.

“At a time when the shipping industry is facing strong headwinds, scale is more critical than ever to capitalize on synergies and capture growth opportunities wherever they arise,” said Rodolphe Saadé, Vice-Chairman of CMA CGM.

Speaking at a press conference in Singapore this morning, he added that this development will enable CMA CGM and NOL to address the industry’s new challenges.

“We recognise the strategic importance of Singapore as a key hub for the maritime industry and we are committed to reinforcing its regional leadership,” Saadé added.

At the same time, CMA CGM plans to bring NOL’s liner division APL into the O3 Alliance that the carrier operates in with China Shipping and United Arab Shipping Co.

The Global Shippers’ Forum and other stakeholders have voiced their concern about consolidation and its impact on pricing next year.

While acknowledging this reality, Saadé also noted that the industry is currently facing significant challenges with strong pressure on capacity and pricing.

“In this context, companies need to enlarge their reach and coverage in order to benefit from economies of scale and deliver the full range of services to their customers,” he said. “In order to deliver sustainable performances in the mid-term, scale provides a strategic advantage.”

According to CMA CGM, the combination of the two groups would create synergies and enable the following competitive advantages:
•         the optimization of vessels and occupancy rates on routes
•         economies of scale in terms of purchasing costs, logistics costs and chartering costs
•         a larger and more flexible fleet, allowing to deploy the most efficient vessels on any given route

Overall, the trade portfolio of the combined group would be better balanced, with increased resilience in times of market volatility.
CMA CGM has substantial experience in the integration of businesses and expects the enlarged entity to achieve significant operational synergies.