Merger Or Acquisition? Hapag-Lloyd Faces A Choice

The container shipping industry is once again in disarray. After several years of extreme prosperity, container shipping lines are suffering from low rates and overcapacity, while the European Commission has decided to remove liner shipping's exemption from European competition rules.

 

Vespucci Maritime CEO and analyst Lars Jensen predicted that this will put Germany Hapag-Lloyd (Hapag-Lloyd) and other medium-sized shipping companies under pressure, and the result may be that in the next few years, Hapag-Lloyd and Japan ONE will dominate the large-scale merger of another shipping company.

 

"I think we will see mergers at some point, maybe in 2025. Changes in the EU competition rules for liner shipping will drive this." Lars Jensen said:

 

He sees ONE as an obvious merger candidate for Hapag-Lloyd, but the German shipping company's CEO, Rolf Habben Jansen, has repeatedly denied that a merger with ONE is possible.
However, this has not changed Jensen's expectations, and he believes that developments in the consolidation market could put mid-sized shipping companies in a particularly difficult position, as they do not have the same extensive service network as their biggest competitors.

 

This makes mid-sized shipping lines even more vulnerable at a time when 2M, one of the three major container alliances, is on the verge of dissolution and its future is uncertain.

 

 

 

 

Jensen expects that while MSC and Maersk are large enough to operate independently, mid-sized carriers will have to enter into ship-sharing agreements with their competitors. "To a greater extent, they will be forced to enter into ship-sharing agreements. This means that will become dependent on others' service networks." Jensen added, "I think everyone will see a shift towards more relaxed ship-sharing partnerships because shipping lines can no longer count on their alliances to continue."

 

Hapag-Lloyd, the world's fifth-largest container shipping line, has grown rapidly in recent years, but is still much smaller than larger rivals COSCO Shipping, Duffy Line, Maersk and MSC, the world's largest container shipping company.

 

The German shipping company has recently shown an interest in growth through acquisitions, most recently when South Korean container shipping company HMM was put up for sale by the government and when the city of Hamburg looked to sell its stake in HHLA, the leading terminal operator in the city's port.

 

 

 

 

Both deals slipped through Hapag-Lloyd's hands, but both Jensen and Peter Sand, principal analysts at research firm Xeneta, are in no doubt that Hapag-Lloyd is in desperate need of growth plans. Sand, however, does not see a merger with Japanese carrier ONE as an option. "There is no doubt that it wants to acquire, but that would require finding the right partner, which is not there yet." He adds.

 

"ONE is not a potential target. Hapag-Lloyd would be difficult to acquire and Taiwan has Evergreen Marine which is also not possible." Peter Sand also ruled out another potential target. It pointed out that some of the large Asian shipping companies have countries as their financial backbone, making it much harder to be acquired by a competitor.

 

He predicted that if Hapag-Lloyd's acquisition was successful, Korea's HMM would be the German shipping company's "best partner". However, without future acquisitions, the two mid-sized competitors will outpace Hapag-Lloyd. "If Hapag-Lloyd doesn't do anything, it will be overtaken by ONE and Evergreen."

 

Peter Sand believes that if acquisitions or mergers are not an option, Hapag-Lloyd will focus on streamlining its operations and continue its previous acquisitions of port terminals.

 

He said, "I think we can expect a classic container shipping industry - that is, they will cut the fleet and reduce costs."

 

According to Sand, Hapag-Lloyd could still profit by owning container terminals on its main routes. "Owning your own terminals will pay off." He said.