HAPAG LLOYD is in advanced talks to acquire Israeli container carrier Zim.
The talks have reached an advanced stage, according to a statement issued by Hapag-Lloyd Aktiengesellschafton Sunday evening, although no binding agreements have yet been signed.
While no price has been mentioned by either party Israeli media have pegged the deal to be worth around $4.2bn, eclipsing Zim’s market capitalization of $2.7bn at the time of writing.
Hapag insiders suggest further announcements are expected to be released on Monday, strongly indicating that a deal is imminent and the German carrier has trumped Maersk, which was widely reported to be Hapag’s main rival in the takeover bidding.
The confirmed involvement of Israeli investor FIMI Opportunity Funds in the Hapag deal also suggests that previous hurdles to a takeover have been cleared.
In order for Zim to be sold, the issue of Israeli government’s golden share which is considered to be a matter of national strategic importance to Israel, must be negotiated.
The Hapag announcement confirmed that discussions with FIMI tied to the assumption of obligations under special rights by the state of Israel were also at an advanced stage. Under these special rights, Zim’s management must stay in Israel, and some ships must remain Israeli-owned for national security reasons.
Hapag is reportedly looking to acquire ZIM’s international operations, while the Israeli investor ‘FIMI Opportunity Funds’ would take over the Israeli operations.
The takeover is subject to regulatory approvals by Zim’s shareholders and the state of Israel, which has veto powers for any transaction exceeding 24% of Zim’s shares.
According to a report published by Calcalist, FIMI will take over ownership 16 vessels currently owned by Zim, under a new entity called Zim Israel, while Hapag-Lloyd takes over the 99 chartered vessels in Zim’s fleet.
Takeover to enhance Hapag-Lloyd’s operations as fifth largest carrier
The acquisition of Zim will see Hapag-Lloyd increase its teu capacity, cementing its place as the fifth largest carrier.
Vespucci Maritime founder Lars Jensen estimates an addition of 611,000 teu of capacity with Hapag-Lloyd’s takeover of Zim’s leased vessels.
This will give Hapag-Lloyd a total combined capacity of 3m teu globally, widening the gap between the German carrier and the sixth biggest carrier ONE, with 2.1m teu. It also narrows the gap with the fourth biggest carrier, Cosco, which has a 3.6m teu capacity.
The deal will also give Hapag-Lloyd a leg up on the world’s biggest container carrier who currently has a vessel sharing agreement with Zim.
“Once in place this has a negative competitive impact on MSC and positive on Gemini in especially the Pacific trade. MSC and Zim presently have vessel sharing agreements in place on 6 Transpacific services. After the take-over is completed the current Zim volumes would move onto the Gemini network,” Jensen said.
Obstacles on the horizon
Globes, an Israeli business paper, reported yesterday that the onshore workers of Zim in Israel, currently around 1,000 people, have declared a strike at the company’s headquarters.
It is unclear whether such a strike would involve the entire workforce.
According to the Globes report, Hapag has guaranteed employment for these workers for 1yr in their drafts.
Calcalist reported that only 120 out of the 1000 employees at Zim will be retained following the acquisition as operations in Israel will be consolidated.
The workers’ union is demanding that all 1,000 employees will be guaranteed in addition to grants worth millions following the acquisition.
Furthermore, the current ownership structure of Hapag-Lloyd could subject the deal to a possible opposition by the Israeli government.
The Qatar investment Authority and the Public Investment Fund of Saudi Arabia own shares of 12.3% and 10.2% respectively in Hapag-Lloyd. Given the state of the current geopolitical situation in the Middle East, Israel may not be in favour of the acquisition.
