Asia/Pacific News
China COSCO-CSCL Merger Approval Expected by January
The Chinese Government is expected to approve the merger of China Ocean Shipping (Group) Company (China COSCO) and China Shipping Container Lines Co., Ltd. (CSCL) by January, the Wall Street Journal reports.
Talks of a merger between the state-owned companies were reported to be in advanced stages in October as the two companies worked toward bringing together the two containership businesses.
Reports indicate that the two shipping giants are also looking to merge their tanker, dry bulk, and port operations.
"The thumbs up from Beijing could come by the end of the year or in January, and a formal announcement of the merger will follow," said a source close to the negotiation, adding that the merger, depending on which units are brought together, could be worth upwards of $20 billion.
"It's been a complicated matter, with one of the priorities being to avoid any layoffs from the merger overlaps."
The companies combined would form the fourth largest shipping company in the world, smaller than only A.P. Møller-Maersk A/S, Mediterranean Shipping Co. (MSC), and CMA CGM S.A., reports say.
However, some analysts believe that while the merger would transform the two companies in terms of size, it won't make the resulting shipping company any more efficient or profitable, but rather less receptive to change.
"This is not a plain-vanilla merger of two companies, but of two large companies, where the large get larger with preferential access to cargoes and a quasi-sovereign blessing," said Basil Karatzas of New York-based Karatzas Marine Advisors & Co.
Sources are said to have indicated that China is also in the early stages of a merging some units of China Merchants Energy Shipping Co. and Sinotrans & CSC Holdings Co., a move that Citi Research says would create the largest tanker company in the world and a "significant" Chinese logistics-service competitor.
In August, Ship & Bunker reported that Drewry Shipping Consultants Limited (Drewry) warned that if a merger between China COSCO and CSCL went ahead, it could cause a "domino effect" on carrier alliances and future carrier mergers in Asia, with the potential to be damaging to industry competition.
