NOL Sells APL Logistics for $1.2 billion to Focus on Box Ship Business

APL's headquarters will remain in Singapore

Singapore's Neptune Orient Lines Ltd. (NOL) Tuesday announced it has agreed to sell its APL Logistics Ltd. (APL) business to Japanese company Kinetsu World Express Inc. (KWE) in a deal worth $1.2 billion.

"This is a strategic move that will allow us to focus on improving our liner shipping business, while at the same time enabling APL Logistics to grow," said NOL's Group President and CEO, Ng Yat Chung.

"The transaction will also strengthen our balance sheet and unlock value for our shareholders."

NOL is understood to be 65 percent owned by Singapore state investment company Temasek.

Reports have pointed to the fact that NOL has incurred losses in the each of the last three years, reporting a net loss of $260 million in 2014.

It is understood that APL is profitable, reporting earnings before interest, taxation, depreciation, and amortisation (EBITDA) of $80 million off revenues of $1.66 billion for 2013, and that the losses stem from NOL's container shipping business, which has suffered from industry-wide problems of overcapacity and low freight rates.

Other reports have suggested that the agreed sale price is an excellent deal for NOL in the current climate, while freight rates are low.

Deal values had been expected to be within the range of $750 million to $900 million based on the application of a 10 to 12 multiplier to APL's 2013 EBITDA, with some suggesting current conditions pointed to an even lower estimate of $600 million.

"We intend to retain the headquarters of APL Logistics in Singapore and to run it as a separate unit," said Satoshi Ishizaki, Group President and CEO of KWE.

"I would like to give my assurance that when this transaction is completed, KWE will continue to invest in and expand APL Logistics' services so as to serve our customers better."

The transaction is subject to shareholder and regulatory approval.

In January, NOL's shares were upgraded from "hold" to "buy" on the back of "significant cost savings" from low bunker prices.