Moody's Warn Maersk on NOL Acquisition

Monday November 16, 2015

In response to recent news that Neptune Orient Lines Ltd. is in acquisition talks with Maersk Group and CMA CGM SA, Moody's Investors Service has warned A.P. Moeller-Maersk A/S not to pursue any acquisition, Bloomberg reports.

"Maersk Line could possibly derive some synergies from an acquisition, but Maersk Line is one of the few profitable companies in the sector and it could dilute margins initially," Marie Fischer-Sabatié, a senior vice president at Moody's, told BloombergBusiness.

"Real consolidation could be positive for the cost structure of companies involved, but it would likely take more than just one or two mergers to materially improve the overall market conditions in the container market."

Last month, Maersk cut its 2015 forecast underlying profit by 15 percent to $3.4 billion, and as part of a cost-cutting strategy it will also slash up to 4,000 Maersk Line jobs and reduce network capacity.

Although he noted that the group's base strategy is to grow organically, Nils S. Andersen, chief executive officer for Maersk, said he would "welcome any consolidation - that would only be healthy for the container line industry."

Fischer-Sabatié believes the group is more likely to pursue acquisitions for its oil unit "because it needs to increase its reserve levels.

"If they find the right acquisition target, it could have a positive impact on Maersk Oil's business profile."

Despite Maersk's challenges, Anderson recently pointed out that the group's 2015 showing overall "reflects good performance in very challenging oil and container shipping markets."