Hapag-Lloyd joins forces with Chile's CSAV

Two of the world's highest-profile container shipping lines, Germany's Hapag-Lloyd and Chile's CSAV, announced on Wednesday that they will join forces to create the world's fourth-largest container ship fleet.

The merger, which is subject to the approval of competition authorities, creates a company with a combined revenue of €9bn, a fleet of about 200 ships and a total transport capacity of about 1m TEU [container units].

CSAV, whose largest shareholders are Chile's Luksic mining family, will hold a 34 per cent stake in the new company, which will remain based in Hamburg, in return for contributing its container business and a capital increase of €259m.

"By joining forces, we are creating a stronger, larger and more global company with significant economies of scale and a considerably improved competitive position," said Oscar Hasbun, chief executive of CSAV, which says the merger will result in annual savings of at least $300m.

"The combination with CSAV, Latin America's leading container shipping line, considerably strengthens Hapag-Lloyd in this growth market and adds a strong position in the north-south traffic to the company's global network and to its established strength in east-west traffics," he said.

After a lull in activity in the shipping market since 2005, when AP Moller-Maersk bought P&O Nedlloyd and Hapag-Lloyd bought CP Ships, dealmaking has enjoyed a strong start to the year, hitting $10.5bn worldwide during the first three months of 2014. That is more than double the $4.9bn achieved in the same period a year earlier, according to data from Dealogic.

The growth comes at a time of rebounding volumes in the wider industrial mergers and acquisition market. The value of industrial deals hit $82.4bn in 2013, the highest level since 2010, as confidence started to return to the sector amid improving credit conditions and economic stability.

CSAV grew rapidly during the past decade as it sought to become a worldwide operator, and was briefly among the world's top 10 operators by fleet size. However, it struggled during the 2009 recession when owners of the vessels it chartered had to agree a rescue deal for the company. Last year it had the 20th largest shipping fleet according to Alphaliner, an information service.

In 2011, Quinenco, one of Chile's biggest conglomerates and which is run by the Luksic family, started building up a stake in CSAV, ending up with 46 per cent.

Hapag-Lloyd, which was ranked as the sixth-largest container ship fleet before the merger, was also on the brink of collapse in 2009, but was rescued in a complex deal with a consortium including Hamburg business people and the City of Hamburg.

With an absence of mergers in container shipping in recent years, lines have instead increasingly formed alliances. Hapag-Lloyd belongs to the A6 alliance of lines that share capacity on many routes worldwide.

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The so-called P3 alliance between the three biggest operators by capacity - Denmark's Maersk Line, Switzerland's Mediterranean Shipping Company and France's CMA CGM - was approved by US regulators in March. Approval is still needed from Chinese and European regulators before the tie-up can become fully effective, which Maersk expects by the middle of the year.

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