Maersk Line Ready for Acquisitions!

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Maersk Ends Mega-Ship Building Era With New Acquisition Plans

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Maersk, the owner of the world’s largest container shipping line, will stop ordering newly built vessels and instead pursue takeovers in an industry that has been plagued by overcapacity for almost a decade.

Chairman Michael Pram Rasmussen told Bloomberg at the the company’s Copenhagen headquarters that  A.P. Moeller-Maersk A/S, whose Maersk Line unit has repeatedly broken the world records it has regularly set in mega container ships developed with Asian ship yards, “is done with ordering new steel”.

He said that if Maersk Line needs to grow, it doesn’t make sense to order new ships as there are already too many ships in the market.  So, if we want to grow, we need to do it through acquisitions so that we don’t flood the market with more ships.

Status

Maersk Line still has 27 ships in its order book, corresponding to about 12 percent of its current fleet.  The container industry’s combined order book represents about 17 percent of the global fleet.

It is also to be noted that the shipping industry is suffering from falling freight rates caused by a combination of overcapacity and a slowdown in global trade growth.  Hanjin Shipping Co., South Korea’s biggest container company with 97 ships, last month filed for bankruptcy protection in Seoul.

In 2015, Maersk Line placed orders with ship yards Daewoo Shipbuilding & Marine Engineering Co., with Hyundai Heavy Industries Co. and with Cosco Shipyard Co.  The ships are due for delivery in 2017 and 2018.

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The 11 vessels from Daewoo will carry a record 19,630 standard-sized containers and cost $1.8 billion each.  They are the second-generation version of the so-called Triple-E class vessels that Maersk developed with Daewoo.  The Danish company in 2011 ordered 20 Triple-Es, which carry about 18,000 containers each.

Rasmussen said that it has previously made a lot of sense when we went out and ordered specific vessels.  But there is already a large order book in the market and at the same time, world trade isn’t growing a great deal.

Reflection on the stock market

Maersk shares declined as much as 3.8 percent and traded 2.2 percent lower as of 10:20 a.m. in Copenhagen.  The stock rose 3.4 percent on Thursday when Maersk revealed a new strategy that includes splitting the conglomerate into a transport and an energy company.

Rasmussen said Maersk Line is “well-equipped and ready,” for acquisitions.

While he declined to comment on specific targets, he says options include shipping lines that operate mostly on trade routes overlapping with Maersk’s, which will “give us a lot of synergies.”  It’s also looking at rivals who are strong “in an area where we aren’t present,” so they “fill a hole” in Maersk Line’s network, he said.

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Source: Bloomberg

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