$ 1.7 b NOL up for sale: Will Hapag-Lloyd buy?

Monday, 20 July 2015 00:00 - - {{hitsCtrl.values.hits}}

Singapore Sovereign Wealth Fund Temasek Holdings has put Neptune Orient Lines (NOL) up for sale, says a Wall Street Journal (WSJ) report.

The WSJ reported that Temasek was in talks with one buyer in recent months but the two sides could not agree on a price for the loss-making company. The WSJ put NOL’s market capitalisation at 2.3 billion Singapore dollars ($ 1.7 billion).

The report, citing unnamed sources, said the liner company has been ‘shopped to prospective buyers’ in recent months. NOL is about 67% owned by Temasek, going by Bloomberg data.

The company had been in talks with a prospective buyer, but ‘the two sides couldn’t agree on price’, added the report.

WSJ said such a deal would allow Temasek to exit from the container-shipping business, which has been suffering from overcapacity in recent years.

Earlier this year NOL had merger talks with Germany’s Hapag-Lloyd and Hong Kong’s Orient Overseas but no deal was finalised, the WSJ reported. The report added that NOL was founded in 1968 as Singapore’s national shipping line, and was 65%-owned by Temasek, with the remainder trading on the Singapore Stock Exchange.

The Journal of Commerce says that reports in the past twenty four hours that Hapag-Lloyd has hired investment banks to advise on an initial public offering and the Singapore government is selling its majority stake in Neptune Orient Lines have refuelled speculation of a merger between the two ocean carriers.

The timing of the – as yet unconfirmed – reports is coincidental, but the fact the two companies share a history going back to 2008 has got the industry talking again about a possible tie-up between the two lines.

However, mergers in the shipping industry are difficult to execute. Hapag-Lloyd and NOL tried to merge unsuccessfully in 2008 and Hapag’s attempt to link with fellow German shipper Hamburg Sud in 2013 also failed. In May, NOL completed the sale of its APL Logistics business to Japanese freight carrier Kintetsu World Express for $ 1.2 billion (S$ 1.64 billion), renewing speculation of a sale of the entire company.

Debt-ridden NOL continued to suffer losses in the first quarter in a challenging operating environment, with freight rates hit by persistent overcapacity and uncertain global economic prospects.