Hapag-Lloyd Talks to CSAV About Tie-Up to Fight Industry Slump

Hapag-Lloyd AG is discussing a possible merger with Cia. Sud Americana de Vapores SA, Latin America’s biggest container shipping line, as the companies struggle to overcome a global trade slump that has left the industry in crisis.

The talks are focused on whether “a possible business combination or any other form of association would be of mutual interest,” Hamburg-based Hapag-Lloyd said in a statement today.

Hapag-Lloyd, the biggest German container line with a fleet of 152 vessels, is still reeling from the slump triggered by the 2008 collapse of Lehman Brothers Holdings Inc., reporting a 64 percent decline in profit for the third quarter, its peak season. It’s turning its sights to CSAV after talks to merge with local competitor Hamburg Sued, owned by family-owned German holding company Oetker-Group, failed in March because shareholders of both companies couldn’t agree on terms.

The talks with Valparaiso, Chile-based CSAV “have not resulted in any binding or non-binding agreement between the parties,” Hapag-Lloyd said in the statement, without elaborating further.

CSAV surged 13 percent, the most in more than a year, after Die Welt newspaper reported last night that the Latin American container shipper is negotiating a merger with its German rival.

CSAV’s 86 percent loss in the past three years is the worst performance among peers tracked by Bloomberg. In response to a glut of new vessels, operators such as A.P. Moeller-Maersk A/S are forming alliances with competitors to lower costs and eliminate excess capacity on trade routes.

Billionaire Luksics

The billionaire Luksic family controls CSAV with a 46 percent stake. The Luksic’s holding company Quinenco SA (QUINENC) has put more than $1 billion into CSAV in the past two years after the company lost a record $1.25 billion in 2011.

Top executives of Hapag-Lloyd and CSAV last month met in Miami to discuss a possible merger, Die Welt reported on its website, without saying where it got the information.

Hapag-Lloyd is owned by a group of shareholders including German tourism company TUI AG (TUI1), HSH Nordbank AG and the city of Hamburg. TUI, which holds a 22 percent stake, has endorsed an initial public offering of the shipping company. CEO Friedrich Joussen on Nov. 7 said that he doesn’t expect an exit through an IPO before Hapag-Lloyd’s Rolf Habben-Jansen replaces current CEO Michael Behrendt next July.

Hapag-Lloyd formed an alliance in Asia-Europe trade, called G6, in March 2012. The other partners are APL, Hyundai Merchant (011200) Marine, Mitsui O.S.K. Lines (9104), Nippon Yusen (9101) Kaisha and Orient Overseas Container Line.

To contact the reporter on this story: Nicholas Brautlecht in Hamburg at nbrautlecht@bloomberg.net

To contact the editor responsible for this story: Angela Cullen at acullen8@bloomberg.net

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