Neptune Orient hires 11 banks for Hapag-Lloyd loan
Neptune Orient Lines Ltd., Southeast Asia's largest shipping line, hired 11 banks to arrange a $6 billion loan for its bid to buy TUI AG's Hapag-Lloyd AG unit, according to five people involved in the deal. Bank of Tokyo-Mitsubishi UFJ Ltd., Citigroup Inc., HSBC Holdings Plc, Intesa Sanpaolo SpA, JPMorgan Chase & Co., Mizuho Financial Group Inc., Natixis, Oversea-Chinese Banking Corp., Societe Generale, Sumitomo Mitsui Financial Group Inc., and United Overseas Bank Ltd. will arrange the loan, said the people, who declined to be identified as the information isn't public.
Neptune Orient, competing for Hapag-Lloyd with a German group, said earlier this month it will integrate its APL Ltd. unit with the container shipping line if TUI accepts its final bid. The combination would create the world's third-largest sea- cargo box carrier, behind A.P. Moeller-Maersk A/S and Mediterranean Shipping Co., according to Bloomberg calculations.
Neptune Orient makes a logical candidate to merge with Hapag-Lloyd, but making an acquisition this size when the industry is facing deteriorating outlook increases Neptune Orient's risk, it leaves no room for integration error,'' Hong Kong-based Jon Windham, analyst at Macquarie Securities Ltd. said in a telephone interview today.
Trade between Asia and Europe has declined this year after growing 17 percent in 2007 due to effect of the U.S. subprime crisis on consumer spending and as shipyards began delivering more new vessels, according to Philip Damas, research director at Drewry Shipping Consultants Ltd. in London.
Slowing Demand
The industry may have over capacity this year as demand on the Asia-Europe route slows to 7 percent while it will be little changed in the trans-Pacific sector, Damas said.
Hapag-Lloyd is more focused on trans-Atlantic routes while Neptune Orient on the trans-Pacific trades, Macquarie's Windham wrote in a research report on July 21. A merged company would have a more balanced revenue profile, but would still have significant exposure to the U.S.,'' he wrote.
Singapore-based Neptune Orient plans to pay 1.5 percentage points above the London interbank offered rate as interest and fee for the two-year loan, including interest margin of 125 basis points over Libor and a fee of 50 basis points, said the people. A basis point is 0.01 percentage point. Paul Barrett, a spokesman for Neptune Orient, declined to comment.
TUI, Europe's biggest tourism company, is selling Hapag-Lloyd after bowing to investor pressure earlier this year.
Hamburg Opposition
Investors from Hamburg, the German port city where Hapag- Lloyd is based, including private investment bank M.M. Warburg & Co. and billionaire Klaus-Michael Kuehne, will also continue pursuing the purchase of Hapag-Lloyd, Sebastian Panknin, a spokesman for the city's Finance Ministry, said on Aug. 8.
The Hamburg group has repeatedly said it wants Hapag-Lloyd to remain German-controlled to keep it independent and locally based.
Hapag-Lloyd, valued by some analysts at 5.4 billion euros ($8 billion), would help Neptune Orient bolster its trans-Atlantic presence. Neptune Orient submitted a non-binding offer for the German company on July 21.
Norwegian billionaire John Fredriksen, who holds more than 15 percent of TUI, said a sale of the business should be halted given the current economic climate, and that Hapag-Lloyd should be split off into a separate company instead.
Russian billionaire Alexei Mordashov has raised his stake in TUI to 15.03 percent and said he supports TUI's decision to sell the container shipping unit.
Hanover, Germany-based TUI's shares have fallen 26 percent this year, giving the company a market value of 3.56 billion euros.
Neptune Orient declined 2.7 percent to S$2.56 at the close in Singapore. The stock has fallen 34 percent this year.
The company said earlier this month it will pare expansion plans after second-quarter profit fell 19 percent to $75.8 million, hurt by rising fuel cost.
Neptune Orient, competing for Hapag-Lloyd with a German group, said earlier this month it will integrate its APL Ltd. unit with the container shipping line if TUI accepts its final bid. The combination would create the world's third-largest sea- cargo box carrier, behind A.P. Moeller-Maersk A/S and Mediterranean Shipping Co., according to Bloomberg calculations.
Neptune Orient makes a logical candidate to merge with Hapag-Lloyd, but making an acquisition this size when the industry is facing deteriorating outlook increases Neptune Orient's risk, it leaves no room for integration error,'' Hong Kong-based Jon Windham, analyst at Macquarie Securities Ltd. said in a telephone interview today.
Trade between Asia and Europe has declined this year after growing 17 percent in 2007 due to effect of the U.S. subprime crisis on consumer spending and as shipyards began delivering more new vessels, according to Philip Damas, research director at Drewry Shipping Consultants Ltd. in London.
Slowing Demand
The industry may have over capacity this year as demand on the Asia-Europe route slows to 7 percent while it will be little changed in the trans-Pacific sector, Damas said.
Hapag-Lloyd is more focused on trans-Atlantic routes while Neptune Orient on the trans-Pacific trades, Macquarie's Windham wrote in a research report on July 21. A merged company would have a more balanced revenue profile, but would still have significant exposure to the U.S.,'' he wrote.
Singapore-based Neptune Orient plans to pay 1.5 percentage points above the London interbank offered rate as interest and fee for the two-year loan, including interest margin of 125 basis points over Libor and a fee of 50 basis points, said the people. A basis point is 0.01 percentage point. Paul Barrett, a spokesman for Neptune Orient, declined to comment.
TUI, Europe's biggest tourism company, is selling Hapag-Lloyd after bowing to investor pressure earlier this year.
Hamburg Opposition
Investors from Hamburg, the German port city where Hapag- Lloyd is based, including private investment bank M.M. Warburg & Co. and billionaire Klaus-Michael Kuehne, will also continue pursuing the purchase of Hapag-Lloyd, Sebastian Panknin, a spokesman for the city's Finance Ministry, said on Aug. 8.
The Hamburg group has repeatedly said it wants Hapag-Lloyd to remain German-controlled to keep it independent and locally based.
Hapag-Lloyd, valued by some analysts at 5.4 billion euros ($8 billion), would help Neptune Orient bolster its trans-Atlantic presence. Neptune Orient submitted a non-binding offer for the German company on July 21.
Norwegian billionaire John Fredriksen, who holds more than 15 percent of TUI, said a sale of the business should be halted given the current economic climate, and that Hapag-Lloyd should be split off into a separate company instead.
Russian billionaire Alexei Mordashov has raised his stake in TUI to 15.03 percent and said he supports TUI's decision to sell the container shipping unit.
Hanover, Germany-based TUI's shares have fallen 26 percent this year, giving the company a market value of 3.56 billion euros.
Neptune Orient declined 2.7 percent to S$2.56 at the close in Singapore. The stock has fallen 34 percent this year.
The company said earlier this month it will pare expansion plans after second-quarter profit fell 19 percent to $75.8 million, hurt by rising fuel cost.