CMA CGM to acquire Neptune Orient Lines for $2.4 billion

French container shipping giant CMA CGM has offered to acquire Singapore's state-controlled Neptune Orient Lines (NOL) for $2.4 billion, making its biggest-ever acquisition, thereby strengthening and enhancing the diversity of CMA CGM's trade portfolio and consolidate its position on strategic trade routes.

The boards of both NOL and CMA CGM have unanimously approved the terms of the proposed transaction and the offer will be launched without delay after approval of the relevant authorities which is expected by mid-2016.

CMA CGM, a global leader in container shipping, on Tuesday said the cash offer for NOL, Southeast Asia's largest container shipping company, is subject to the satisfaction of the pre-conditions, namely, approvals from antitrust authorities.

NOL's majority shareholders, state-sponsored fund Temasek and its affiliates, have irrevocably undertaken to tender all of their shares in acceptance of the offer, CMA CGM said.

Upon the satisfaction of approvals from antitrust authorities, CMA CGM will launch an offer at a price of S$1.30 per share, which represents a 49 per cent premium to NOL's unaffected share price and a 33 per cent premium to NOL's three-month volume-weighted average share price to 16 July 2015.

''Leveraging the complementary strengths of both companies, CMA CGM will further reinforce its position as a leader in global shipping with combined revenue of $22 billion and 563 vessels. By bringing together the know-how of both teams, the enlarged group will be even better positioned to provide premium services to its customers across all markets,' Rodolphe Saadé, vice chairman of CMA CGM, said.

''At a time when the shipping industry is facing strong headwinds, scale is more critical than ever to capitalize on synergies and capture growth opportunities wherever they arise. I firmly believe CMA CGM will enable NOL to address the industry's new challenges. We recognise the strategic importance of Singapore as a key hub for the maritime industry and we are committed to reinforcing its regional leadership,'' he added.

CMA CGM plans to use Singapore as a key hub in Asia by establishing its regional head office. This consolidation in Asia will helo CMA CGM provide efficient and quality services to customers in the region, the company said.

''The combined market presence delivered by the transaction would achieve the scale needed to enhance competitiveness for NOL's operations and offer a clear and sustainable long term direction for the combined entity. The transaction would enable NOL to grow as part of a larger entity with the resources of the world's third largest container shipping line,'' Ng Yat Chung, CEO of NOL, said.

''We are supportive of this transaction as it presents NOL with an opportunity to join a leading player with an extensive global presence and solid operational track record,'' Tan Chong Lee, head portfolio management at Temasek, added.

CMA CGM is the world's third largest container shipping firm, with 469 vessels and a global market share of 8.8 per cent. In 2014, the group handled over 12 million TEUs and generated $16.74 billion in revenues. A founding member of the Ocean Three Alliance with UASC and CSCL, CMA CGM is present across 160 countries, with 22,000 employees in 655 offices, and has a fleet capacity of 1,781 thousand TEUs.

NOL is a leading shipping company operating under the American President Lines (APL) brand. In 2014, the company's revenues reached $7.04 billion. Currently, NOL has more than 7,400 employees in 180 offices across more than 80 countries and operates 94 vessels, representing 618 thousand TEUs in fleet capacity.

The combined group's customers would have access to an enlarged and well-balanced shipping coverage across all the strategic trades of global commerce, and to an extended range of products and services.

The transaction is valuing NOL at a price to book ratio of 0.96 times. The transaction will be financed by a combination of available cash and bank financing provided by a syndicate of international banks.

Post-closing, CMA CGM intends to deleverage its balance sheet within 18 to 24 months through synergies and assets sales for an amount of at least USD 1 billion, with the aim to reduce debt gearing ratio to below 0.8 times.