On July 9, 2017, COSCO Shipping Holdings Co. Ltd. announced that COSCO Shipping and SIPG (Shanghai International Port Group) made an offer to all shareholders of OOCL to acquire all issued OOCL shares—worth USD 6.3 billion. On completion, assuming all OOCL shareholders tender their shares, COSCO Shipping will hold 90.1%, while SIPG will hold 9.9% of OOCL. While OOCL’s majority owner has accepted the bid, the offer is dependent upon the satisfaction of pre-conditions, which include the necessary regulatory approvals as well as approval from COSCO Shipping Holding’s shareholders.
The current market share of COSCO (all trade) is 8.3%. After the acquisition, the global market share will increase to 11.5%, making COSCO the world’s 3rd largest carrier in terms of market share. COSCO announced that OOCL will maintain its brand and the management team for at least 2 years.
The transaction will mark the latest consolidation in the global maritime industry—aligning both COSCO and OOCL in an effort to deliver a stronger competitive advantage. OOCL is the seventh largest container shipping company in the world, with extensive container shipping routes and networks. The combined COSCO and OOCL will operate more than 400 vessels over an expanded network, with capacity exceeding 2.9 million TEUs including order book. The combination will be expected to enhance the industry leading position of both companies as a whole.
In speaking with our international partners, we don’t foresee a significant rate impact in the second half of 2017. Both companies are members of the Ocean Alliance, and will continue to work together under this framework moving forward—eliminating carrier level competition between the pair. By leveraging the strengths of each company, the businesses seek to enhance their operating efficiencies and competitive positions to achieve sustainable growth in the long term.
In theory fewer competitors could mean more rate stability, but the equation is also fluid in that the remaining players may pursue new capacity which would create rate instability as the carriers jostle for market position.
Additionally, there is no capacity impact expected for the coming months, at least until April or May, 2018, when new contracts and services are to be reviewed and potentially reconstructed.
Deringer will continue to monitor COSCO Shipping’s bid for OOCL and will provide an update when more information is made available. If you have any additional questions, please send an email to Deringer’s Marketing Department.