On July 9, Cosco Shipping Holdings, parent of the world’s fourth-largest container line, announced that it will acquire Hong Kong’s Orient Overseas International, or OOIL, for 49.2 billion Hong Kong dollars ($6.3 billion). The deal will create the world’s third-largest line, overtaking CMA CGM of France.
“By leveraging the strengths of each company and achieving synergies, the businesses will enhance their operating efficiencies and competitive positions to achieve sustainable growth in the long term,” Cosco said in a statement. OOIL, which owns Orient Overseas Container Line, and Cosco have more than 400 vessels combined, according to the latter.
Cosco itself was formed last year through the merger of two Chinese state-owned players. Its appetite for further expansion is reflected in the premium it is paying for OOIL: The purchase price per share is 31% higher than the Hong Kong company’s closing price the week before the deal was announced. CMA CGM and Evergreen Marine of Taiwan were apparently also interested in buying OOIL.
STRENGTH IN NUMBERS The Cosco deal is just one of several recent consolidations to hit the industry as it faces two trade-denting headwinds: the slowdown in China and a rise in digital commerce. The benchmark China Containerized Freight Index has remained below 1,000 since 2015. Last year, CMA CGM purchased Singapore’s Neptune Orient Lines, while A.P. Moller-Maersk of Denmark purchased Germany’s Hamburg Sud Group earlier this year. The industry slump is also what sent Hanjin Shipping into bankruptcy last August.
