Wednesday 9 December 2015

France's CMA CGM offers $3.38b to buy out NOL

French carrier offers $3.38b to buy out NOL
By Jacqueline Woo, The Straits Times, 8 Dec 2015

Neptune Orient Lines (NOL), one of the pioneering companies in Singapore history, has received an offer from a French carrier valuing it at $3.38 billion.

NOL said yesterday that CMA CGM is offering $1.30 a share in cash. Temasek Holdings, which owns 67 per cent, has agreed to sell its shares. The offer represents a 49 per cent premium to NOL's last unaffected traded share price of 87.5 cents on July 16.

NOL and CMA CGM, the world's third-biggest container shipping firm, had announced last month that they were in talks for the buyout - one of the industry's largest.

The acquisition will allow the privately owned CMA CGM, which plans to delist NOL, to "cement its position among the global leaders in the container shipping industry", said an NOL statement to the Singapore Exchange.

NOL, which was formed in 1968, has been looking for a buyer for months. The firm has high debt levels and has been unable to return to profitability in recent years amid the downturn in global shipping.

French shipping giant CMA CGM to reinforce Singapore's hub status
CMA CGM plans regional HQ here as part of increased commitment
By Jacqueline Woo, The Straits Times, 8 Dec 2015

French shipping line CMA CGM has pledged to "increase its commitment" to Singapore and help reinforce the country's position as a leading maritime hub.

The reassurance came yesterday from the firm's vice-chairman, Mr Rodolphe Saade, who was speaking after its stunning $3.38 billion buyout offer for home-grown shipping firm Nepture Orient Lines (NOL).

Mr Saade, the son of the family-controlled firm's founder and chairman Jacques Saade, said that CMA CGM plans to shore up its Singapore links by establishing its regional head office here and using the country as a key hub in Asia.

"Singapore and the region are very important to our Asia strategy. We do believe they are key growth drivers," he noted, adding that the firm will "increase significantly" its volume at the ports here.

He said CMA CGM will also continue to develop NOL's container business under the APL brand.

Mr Saade told a briefing here yesterday that he hopes NOL's top management will stay on board.

He also noted that NOL and CMA CGM have been in talks over the buyout for a year, adding that the industry operates in a time where "scale is more critical than ever".

The acquisition marks the first and largest consolidation for the industry in recent years, as global shipping continues to be weighed down by slowing demand and severe overcapacity.

Analysts have pointed out that the acquisition of NOL, the largest shipping container firm in South- east Asia, will help strengthen CMA CGM's presence where it is lacking, especially on transpacific routes.

NOL chief executive Ng Yat Chung, who was also at the briefing yesterday, said the buyout would deliver "the scale that is required for NOL to succeed in the current climate and to help NOL get sustainable growth". The firm, on its own, would otherwise need "significant capital investments" to maintain its competitiveness.

Mr Ng acknowledged the sensitivities surrounding the sale of NOL, which was, after all, founded to support the growth of Singapore as a maritime centre.

But he added: "It has done very well. Today, it's a major maritime hub in the world... The change in ownership of NOL will not impair Singapore's continuing journey to be premier maritime hub."

Mr Ng also said it is "inevitable" that there will be some staff cuts as a result of the acquisition, but stressed that CMA CGM will honour any severance packages. NOL has more than 7,400 staff, with around 600 in Singapore.

Privately owned CMA CGM said it will delist NOL once the buyout is completed. It also plans to sell assets worth US$1 billion (S$1.4 billion) from the combined entity over the next 18 to 24 months to reduce debt.

Mr Ng said CMA CGM is likely to send a general offer to NOL shareholders in June next year.

NOL's majority stakeholder Temasek Holdings has given the acquisition the green light, adding it will tender all of its 67 per cent holding.

Mr Tan Chong Lee, head of portfolio management at Temasek, said in a statement: "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.

"We also note and welcome the commitment of CMA CGM to enhance Singapore's position as a key maritime hub and grow Singapore's container throughput volumes."

Notable chiefs at the helm of NOL
By Chia Yan Min, The Straits Times, 8 Dec 2015


Managing director from 1973 to 1977

When Mr Goh Chok Tong took over Neptune Orient Lines in 1973, he faced the daunting task of turning the loss-making shipping firm around. He gave himself three years to do the task and managed to pull it off within two. In 1976, NOL's profits soared.

Mr Goh first joined the company as a 28-year-old planning and projects manager in 1969, a year after NOL was set up.

His success at NOL led then Finance Minister Hon Sui Sen to recommend him as a People's Action Party candidate and, later, as Mr Hon's successor. Mr Goh became Prime Minister in 1990, succeeding Mr Lee Kuan Yew.


Chief executive from 1979 to 1999

Mr Lua started out as a civil servant and was tasked to lay the groundwork for establishing NOL in 1968.

Rising through the ranks, he eventually became NOL's chief executive, a post he held for 20 years.

Under Mr Lua's leadership, NOL acquired American President Lines in 1997 for US$825 million - at the time, the largest deal in Singapore's corporate history.

For his work in establishing Singapore's modern shipping industry, he was inducted into the Maritime Asian Shipping Hall of Fame in 2002.

Mr Lua died in 2010 at the age of 72.


Chief executive from 2003 to 2006

Despite not having a shipping background, Mr David Lim was such a favourite to take over at the helm of NOL that he was offered the job the same day his surprise retirement from politics was reported.

Mr Lim unexpectedly quit as Acting Minister for Information, Communications and the Arts in 2003.

A President's and Colombo Plan Scholar, he rose through the rungs of Government and government-linked organisations, helping to steer Jurong Town Corporation, port operator PSA and Suzhou Industrial Park.

Mr Lim stepped down as NOL chief in a shock departure three years after he took over the helm of the company and a month after it reported a sharp drop in first-quarter profit.


Chief executive from 2008 to 2011

Mr Ron Widdows, who had previously been the head of NOL's container shipping unit APL, was the third change in the NOL hot seat in nine years.

Mr Widdows had been based in Singapore since 1999. He joined APL in 1980 and became its chief executive in 2003, six years after NOL acquired it. He spent more than three decades with NOL.

His appointment as chief executive sparked speculation that NOL was serious about merging with major German container line Hapag-Lloyd.

NOL put in a bid to acquire its German rival but eventually dropped out of the race.

Good ship NOL deserves final berth in safe harbour
It has done well to put Singapore firmly on global maritime map
By Aaron Low, Deputy Business Editor, The Straits Times, 8 Dec 2015

On Aug 22, 1969, the Neptune Aquamarine set sail, the first of many journeys that would mark the growth of Singapore's small merchant fleet.

The Aquamarine was Neptune Orient Line's first new ship and represented both a determination of a new country to survive, as well as its aspirations to conquer the world beyond its shores.

More than 40 years after that historic first voyage, the journey looks set to end, with NOL about to be sold to a French company.

But tears are unlikely to be shed because, on most counts, the deal makes sense.

To start, the $1.30 per share offer from CMA CGM is unlikely to see much opposition from NOL shareholders.

Singapore investment firm Temasek Holdings, which holds about 67 per cent of the company, has thrown its weight behind the offer, which values NOL at about $3.38 billion.

At $1.30 a share, the offer price is nearly 50 per cent higher than the share price before the takeover offer was announced.

The offer also means CMA CGM is paying nearly par value for the underlying assets of the company.

"The offer is more than fair given the context of other comparable offers and in the context of the industry," said Credit Suisse analyst Timothy Ross.

NOL is being sold at a time when the industry is facing tremendous pressure, from record low freight rates to massive over-capacity.

Over the past decade, NOL has been profitable for only five years. The last four years saw it log more than $1.5 billion in losses.

In fact, despite a series of major cost-cutting exercises in recent years and the sale of its logistics business earlier in the year, there just was no stopping the bleeding.

The main reason - and also the reason CMA CGA decided to pay a premium for NOL - is that shipping liners need scale to compete effectively.

Since the start of this decade, there has been a wave of consolidation in the industry as shipping liners bought each other out to achieve economies of scale and press down costs.

NOL itself knew this.

In 1997, it merged with a larger American competitor, which gave it critical mass to push the company to the next level.

In 2008, NOL made an ambitious US$7 billion play for German liner Hapag-Lloyd, which was twice its size. The bid failed mainly because of its timing - just as the financial meltdown began and the industry was heading into one of its worst periods.

Today, scale is as relevant as before, and NOL just does not have the heft to compete effectively.

Another ambitious reach for a bigger competitor is out of the question. With NOL facing continued losses, shareholders would not be likely to readily stump up billions of dollars with no guarantee that the investment would yield positive returns.

But there is also the view that NOL is more than a shipping firm - it is also a Singapore icon.

NOL chief Ng Yat Chung has acknowledged that there is an attachment to the firm as a national symbol. But while it may be true that NOL was set up to spearhead Singapore's push to become a maritime hub in the early days, he said, a change in ownership will not impair the nation's ambitions to become a global maritime hub.

In fact, CMA CGA has said it "remained committed to Singapore", and will base its regional headquarters here.

CMA CGA vice-chairman Rodolphe Saade said the company will retain all of NOL's business in Singapore and could even add volume in the future.

Still, this might not satisfy those who believe it may seem insensitive to abandon this trustworthy ship just because it seems to have lost its way.

But to label the deal as such will be to negate the great success NOL has had over the decades. Instead, perhaps the better thing is to acknowledge that NOL has come a long way. It has sailed all around the world, completing its objective of putting Singapore firmly on the global maritime map.

And for that, it deserves a final send-off.

Analysts give thumbs up for NOL buyout
They see $3.38b offer by French shipping giant CMA CGM as fair
By Jacqueline Woo, The Straits Times, 9 Dec 2015

Analysts have given the buyout offer for Neptune Orient Lines (NOL) the thumbs up, adding that the container shipping firm's acquisition by France's CMA CGM is likely a done deal.

Family-owned shipping giant CMA CGM on Monday put a whopping $3.38 billion, or $1.30 a share, cash offer on the table to buy NOL.

It represents a 49 per cent premium over NOL's last unaffected traded share price of 87.5 cents on July 16. NOL shares slipped half a cent or 0.4 per cent to $1.22 yesterday.

Its controlling shareholder Temasek Holdings has agreed to tender all of its 67 per cent stake.

Singapore-based Mr Rahul Kapoor, director of shipping research firm Drewry Maritime Services, told The Straits Times that NOL has suffered from sliding volumes and freight rates in recent years.

"The 2015 volume total is on course to be the lowest since 2009, while average freight rates are destined to be the lowest in at least a decade," he said. "It's a toxic combination that the management has failed to arrest, and Temasek appears to have seen the writing on the wall that a turnaround is not imminent."

Given that CMA CGM's offer marks a "very good price... anything more than that would have been hard to get", Mr Kapoor added.

NOL in October reported an 84 per cent plunge in earnings to a net loss of US$96 million (S$135 million) for its third quarter to Sept 18. The latest Temasek Review shows that economic value added was a negative US$599 million for the financial year 2014. The five-year total shareholder return was negative 12.5 per cent.

OCBC Investment Research analyst Eugene Chua voiced similar sentiments, noting that while the offer price implies a valuation 0.96 times of NOL's book value, it is a "fair" one, given the muted outlook of the global container shipping industry.

He said in a note it was likely Temasek had willingly accepted the offer at a slight discount on hopes that the deal would bring greater economic benefit to Singapore.

CMA CGM on Monday pledged to "increase its commitment" to the Republic and reinforce its position as a leading maritime hub by setting up its regional headquarters here and bringing in more container volume to the ports.

Still, Temasek is set to take a big hit. In 2004, the firm lifted its stake to more than 50 per cent, even launching a surprise $2.8 billion cash offer for 70 per cent of NOL it did not own at $2.80 a share.

CIMB Research analyst Raymond Yap said in a note he expects the regulatory authorities to give the acquisition the go-ahead, as "it will not disturb the competitive position of the alliances too greatly".

He added that NOL stakeholders should accept the offer. "CMA CGM is the only credible buyer for NOL and, without this deal, we expect NOL's share price to collapse."

Shareholder Lim How Teck, who was NOL's deputy chief executive and chief financial officer in the 1990s, said it is possible that selling NOL two or three years down the road would have fetched better prices, given that the industry is currently in the trough of the cycle.

"As part of the old guard that helped to grow the company for so many years, it's sad that NOL is going to disappear," he said. "But there's also the worry that if they don't sell now, there may not be a suitor later. At least the price is fair."

The deal will go through next year, pending anti-trust clearances from the United States, the European Union and China.

CMA CGM exec gives his take on the NOL takeover
By Marissa Lee, The Straits Times, 10 Dec 2015

The buyer at the door of Singapore's national liner has a decades-old appetite for acquisitions.

If the deal proceeds, the takeover of Neptune Orient Lines (NOL) will hardly be the first time France's CMA CGM sweeps a national icon into its fold.

The shipping giant, privately owned by the billionaire Saade family, made its first leap onto the league tables after it was chosen by the French government to take state-backed Compagnie Generale Maritime (CGM) private in 1996.

On Monday, after one year of talks, CMA CGM proposed a $3.38 billion cash buyout of Temasek Holdings-controlled NOL.

"We were the first ones to initiate the discussions with NOL and Temasek and it made sense to them, that is why we carried on with the discussions," CMA CGM vice-chairman Rodolphe Saade told The Straits Times.

"Of course they were talking to others... I don't know about the offers of the others, but what I will say is that we are the third-largest container carrier in the world."

A fierce industry consolidator, CMA CGM has, over the years, acquired and integrated brands such as government-owned Australian National Line, African specialist Delmas and Taiwan's Cheng Lie Navigation into its suite.

If the anti-trust authorities greenlight the buyout, NOL's name will disappear and American President Lines (APL), the brand that NOL vessels operate under, will be expanded on all continents, he said.

The NOL deal, set to close in the second half of next year, also sees CMA CGM making a commitment to reinforce Singapore as a maritime hub by sending more volumes through the PSA ports here.

Very few of CMA CGM's ships call at Singapore now. Most call at Malaysia's Port Klang instead.

Despite a slump in global trade volumes, Mr Saade is convinced that "double hubbing" in South-east Asia makes sense. "It's not a question of competition (between the two ports). We have enough volumes to operate in the two terminals."

In fact, CMA CGM is still seeing volumes grow and it is overcapacity rather than falling volumes that has pushed freight rates down and revenues in turn, added Mr Saade.

He expects freight to struggle over the next six months but dismisses notions that Temasek is exiting a sinking industry.

"People have said many things about shipping for many years, but if shipping was not there, we would not have TV sets and all kinds of other goods at competitive prices. Because today, the only competitive and environmentally friendly mode of transport is shipping. Maybe one day it will be different, but at least for the years to come, I don't believe so."

Sticking by a bold vision is one trait Mr Saade shares with his father, CMA CGM chairman and chief executive Jacques Saade. The senior man emigrated from Lebanon to the French port city of Marseille amid a civil war.

When he founded Compagnie Maritime d'Affretement (CMA) in 1978, just five crew on a single ship plied the Mediterranean route.

After a visit to China, the graduate of the London School of Economics quickly anticipated the nation's rise as an export centre.

He opened CMA's first office in Shanghai in 1992, even before his ships were allowed to call directly at the Chinese ports.

As for how CMA CGM intends to turn around the fortunes of loss- making NOL, Mr Saade said: "I will not comment on the way it is being managed now but I would say we firmly believe we have the expertise to allow NOL to develop a much stronger and better business."

* CMA now owns 78.07% of NOL

French shipping giant's offer wholly unconditional after Temasek, affiliates tender shares
By Chia Yan Min, Economics Correspondent, The Straits Times, 11 Jun 2016

French shipping giant CMA CGM's offer for Neptune Orient Lines (NOL) is now wholly unconditional, after majority shareholders Temasek Holdings and its affiliates tendered all their shares in acceptance of the offer.

This means the acceptance condition of the takeover has been met.

CMA CGM now owns 78.07 per cent of NOL shares and has confirmed its intention to take the company private.

It can delist NOL once it holds more than 90 per cent of the firm.

CMA CGM also said it does not intend to increase its offer price of $1.30 per share in cash. The deadline has been extended to 5.30pm, July 18.

"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," said Mr Tan Chong Lee, the joint head of Temasek's portfolio management group.

"Their complementary strengths will yield mutually beneficial results. We also note and welcome the commitment of CMA CGM to enhance Singapore's position as a key maritime hub and grow Singapore's container throughput volumes," he added.

NOL shares closed 0.5 cent up at $1.305 yesterday.

Privately-owned CMA CGM also announced a change in the composition of NOL's board of directors, following the change in control of the Singapore company.

The reconstituted board, comprising 10 members, was appointed with effect from Thursday.

Its new executive chairman is CMA CGM vice-chairman Rodolphe Saade, who takes over from Mr Kwa Chong Seng.

The French company was founded in 1978 by Mr Saade's father, Mr Jacques Saade.

The other board members are Mr Nicolas Sartini, Mr Lars Kastrup, Mr Serge Corbel, Mr Ziad Tabet, Mrs Mathilde Lemoine, Mr Ng Yat Chung, Mr Kwa Chong Seng, Mr Quek See Tiat and Mr Tan Puay Chiang.

NOL's delisting would follow in the footsteps of other Singapore names being delisted or privatised, such as Osim International and Singapore-based Tiger Airways.

CMA CGM to acquire NOL, reinforcing its position in global shipping
Temasek and its affiliates tender their NOL shares to the offer, bringing CMA CGM's stake in NOL to 78.07%*

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