Shares of HK-based ocean carrier OOCL surge on Cosco interest

Chinese shipping giant favourite in fray that includes France’s CMA CGM and Taiwan’s Evergreen

PUBLISHED : Wednesday, 18 January, 2017, 9:45pm
UPDATED : Wednesday, 18 January, 2017, 11:04pm

Shares of Orient Overseas Container Line surged the most in five years on Wednesday on the Hong Kong stock exchange following unconfirmed reports of a takeover bid from mainland-based shipping giant China Ocean Shipping Group (Cosco).

The bid will also put Cosco in direct competition with France’ CMA CGM and Taiwan’s Evergreen, who are also believed to be in the fray for the largest shipper in Hong Kong.

The talks about a potential buyout saw shares of Hong Kong-listed OOIL rise 7.3 per cent on Wednesday to HK$42.1. The company’s shares have risen nearly 31 per cent from the end of last year, following takeover reports.

Earlier on Wednesday mainland media firm Caixin reported that Cosco had officially made a bid for OOCL, citing unidentified sources.

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A senior official of Cosco Container Lines told the Post on condition of anonymity that it was highly likely that the mainland shipping giant would emerge the eventual winner.

“If OOCL were really to be offered for sale, Cosco would definitely be the top contender,” the official said. “This would be a mega-deal that would need approval from the Chinese leadership.”

Cosco officials did not respond to the reports, when contacted. An OOCL spokesman said the company would not “respond to market rumours and speculations,” and said that the shipping industry had witnessed a number of changes over the past year, which had triggered speculation of potential mergers and acquisitions.

Over the past few months, reports have been rife that CMA and Evergreen would bid for OOCL, the shipping line that is owned by the family of former Hong Kong chief executive Tung Chee-hwa.

A weak shipping market and sluggish global trade prospects have made it difficult for shipping companies to increase profits.

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OOCL’s parent company Orient Overseas International (OOIL) reported a loss of HK$56.7 million for the first six months of 2016, compared to profit of HK$238.6 million during the same period in 2015. It is the world’s ninth-largest container liner in terms of capacity, according to data provider Alphaliner.

Cosco, following its merger with China Shipping Group in January 2016, is the fourth-largest shipper worldwide.

“It is not a surprise if the Chinese government steps in to orchestrate a marriage between a mainland shipping giant and a Hong Kong counterpart,” said Xiong Hao, assistant general manager of Shanghai Jump International Shipping. “But the precondition is that OOCL needs to be really put up for sale.”

CMA was believed to be another likely buyer of OOCL after the French shipper acquired Singapore’s NOL last year.

But the final decision will still depend on whether OOIL chairman Tung Chee-chen who controls a controlling stake in the firm decides to sell the company.

In 2015, Cosco posted a profit of 283 million yuan (HK$321 million), thanks to government subsidies. For the first three quarters of 2016, the company earned 33 million yuan, a drop of 91 per cent from the year-earlier period.