OOCL and Cosco quiet on takeover talk

OOCL and Cosco quiet on takeover talk

Orient Overseas Container Line (OOCL) and Cosco Shipping have both kept quiet today on the latest container consolidation news. Shares in OOCL’s parent, OOIL, leapt yesterday on the back of another Wall Street Journal (WSJ) report claiming state-backed Cosco was close to buying out the Hong Kong liner for a deal thought to be worth more than $4bn.

Splash’s attempts to get comments from spokespeople at OOCL failed today while Cosco officials declined to comment on the matter.

Shares in OOIL closed up 1.71% today to close at HK$53.55.

This is not the first time that OOCL has been linked with a buyout from Cosco by the WSJ. When the newspaper carried a report in January that Cosco was in talks to take over OOCL, Andy Tung, the CEO of the Hong Kong liner, issued an email to all staff in which he described takeover talk as “untrue”.

Both OOCL and Cosco are in the same new container grouping, the Ocean Alliance, which launched on April 1 with partners CMA CGM and Evergreen.

Drewry Financial Research Services (DFRS) issued a report today on the Cosco/OOCL rumours resurfacing, saying that if the deal materialised it would mark a “Big Win” for Cosco.

“Cosco will get a prized asset and a very well-run container carrier for a modest price just when the industry fortunes are looking up for a sustained recovery,” DFRS stated, adding: “In an increasingly competitive, commoditised and top heavy industry, we believe it is a matter of time and price before the owners of OOIL decided to cash out in an upswing. As the industry is witnessing a strong upturn and valuations have risen materially, both the time and price is right, in our view.”

Other analysts remain skeptical on the much talked about deal. One container analyst, speaking to Splash on the condition of anonymity as both Cosco and OOCL are his clients, said: “I continue to see no need for OOIL to sell OOCL, with the latter firmly in the strong Ocean Alliance generating sufficient scale and therefore product/cost advantages plus the prospects of potentially improved times ahead.”

The analyst went on to warn that OOCL’s famous brand might take a knock if it was brought under the wing of Cosco.

“The state sponsored mentality of Cosco will likely erode most of the value which OOCL has painstakingly built over the years, unless of course OOCL’s highly professional and competent associates take meaningful senior leadership roles within the new entity,” the analyst maintained.

Sam Chambers

Starting out with the Informa Group in 2000 in Hong Kong, Sam Chambers became editor of Maritime Asia magazine as well as East Asia Editor for the world’s oldest newspaper, Lloyd’s List. In 2005 he pursued a freelance career and wrote for a variety of titles including taking on the role of Asia Editor at Seatrade magazine and China correspondent for Supply Chain Asia. His work has also appeared in The Economist, The New York Times, The Sunday Times and The International Herald Tribune.

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