TUI struggles to divest Hapag-Lloyd - sources
TUI AG is pushing back the deadline for the planned divestment of a stake in Hapag-Lloyd again as it struggles to find a buyer, five people familiar with the process said, Reuters reports."We need a more stable market environment. At the moment it is impossible to get a fair valuation," a person close to the owners of the world's fifth-biggest container shipping line told Reuters on Thursday.
It is now unlikely that any sale will be agreed this autumn, and talks may drag on until next year, two other people said.
German tourism group TUI AG aims to exit its 38.4 percent holding in Hapag-Lloyd and has said it had not yet decided whether to sell or float its stake, adding it may also use its put option.
Container shipping lines are currently suffering from low freight rates, sky-rocketing fuel costs and increasing problems with piracy.
At the same time, capital markets effectively remain closed for a possible listing, as the euro zone debt crisis and U.S. budgetary problems scare investors.
Several groups from China and Singapore have expressed interest but not actually bid for Hapag-Lloyd, while contender Oman is currently stepping down its efforts, the sources said.
"TUI may actively restart the sales process when freight prices pick up," one of the people said.
Container freight rates on Europe-Asia routes have about halved within the last 12 months, and Orient Overseas Container Lines said on Wednesday that revenues on Asia-Europe routes decreased 13 percent in the second quarter.
According to analysts, the prices that shippers charge for transporting freight containers are likely to remain muted for some time despite an expected slight improvement in autumn.
"We are in a very tight spot in the market. Most shipping groups are currently only getting their fuel costs covered, especially on the Asia-Europe routes," said Sydbank shipping analyst Jacob Pedersen.
The high season of August and September, when most goods for Christmas season are shipped, should see some price momentum although rates are likely to remain "a lot" below last year's level, he added.
NO BIDS
If the market remains muted, TUI may use an option to sell its stake to Hapag-Lloyd's majority owner Albert Ballin -- a group of Hamburg-based investors led by Klaus-Michael Kuehne, the majority owner of Swiss logistics group Kuehne & Nagel -- in January 2012.
If Ballin is unable to finance the acquisition -- whose price would be determined by an advisory opinion -- TUI has the right to sell its stake to a third party and Ballin would have to surrender a roughly 12 percent stake at the same price to give the buyer majority control.
"There is still no real bidding process," a person close to Hapag-Lloyd said, adding that offers initially expected by the end of July have so far not yet materialised.
Talks with China's HNA Group, parent of Hainan Airlines , and China Shipping Container Lines are proceeding very slowly, three sources said.
A CSCL spokeswoman denied interest in Hapag, while HNA was not available for comment.
Oman, which in June flagged interest in TUI's Hapag stake in writing, is currently not actively pursuing the deal as the government wants to spend the money on other projects following public protests in the country, a person close to the negotiations said.
"The government wants to take money from foreign reserves and put it back into the economy rather than buy stakes of foreign groups," the source said.
Oman has this year already increased spending to create jobs for Omani citizens, has hiked salaries and pensions of public employees and has introduced unemployment benefits.
Albert Ballin was not available for comment.
TUI shares closed 3.6 percent higher at 6.72 euros.
It is now unlikely that any sale will be agreed this autumn, and talks may drag on until next year, two other people said.
German tourism group TUI AG aims to exit its 38.4 percent holding in Hapag-Lloyd and has said it had not yet decided whether to sell or float its stake, adding it may also use its put option.
Container shipping lines are currently suffering from low freight rates, sky-rocketing fuel costs and increasing problems with piracy.
At the same time, capital markets effectively remain closed for a possible listing, as the euro zone debt crisis and U.S. budgetary problems scare investors.
Several groups from China and Singapore have expressed interest but not actually bid for Hapag-Lloyd, while contender Oman is currently stepping down its efforts, the sources said.
"TUI may actively restart the sales process when freight prices pick up," one of the people said.
Container freight rates on Europe-Asia routes have about halved within the last 12 months, and Orient Overseas Container Lines said on Wednesday that revenues on Asia-Europe routes decreased 13 percent in the second quarter.
According to analysts, the prices that shippers charge for transporting freight containers are likely to remain muted for some time despite an expected slight improvement in autumn.
"We are in a very tight spot in the market. Most shipping groups are currently only getting their fuel costs covered, especially on the Asia-Europe routes," said Sydbank shipping analyst Jacob Pedersen.
The high season of August and September, when most goods for Christmas season are shipped, should see some price momentum although rates are likely to remain "a lot" below last year's level, he added.
NO BIDS
If the market remains muted, TUI may use an option to sell its stake to Hapag-Lloyd's majority owner Albert Ballin -- a group of Hamburg-based investors led by Klaus-Michael Kuehne, the majority owner of Swiss logistics group Kuehne & Nagel -- in January 2012.
If Ballin is unable to finance the acquisition -- whose price would be determined by an advisory opinion -- TUI has the right to sell its stake to a third party and Ballin would have to surrender a roughly 12 percent stake at the same price to give the buyer majority control.
"There is still no real bidding process," a person close to Hapag-Lloyd said, adding that offers initially expected by the end of July have so far not yet materialised.
Talks with China's HNA Group, parent of Hainan Airlines , and China Shipping Container Lines are proceeding very slowly, three sources said.
A CSCL spokeswoman denied interest in Hapag, while HNA was not available for comment.
Oman, which in June flagged interest in TUI's Hapag stake in writing, is currently not actively pursuing the deal as the government wants to spend the money on other projects following public protests in the country, a person close to the negotiations said.
"The government wants to take money from foreign reserves and put it back into the economy rather than buy stakes of foreign groups," the source said.
Oman has this year already increased spending to create jobs for Omani citizens, has hiked salaries and pensions of public employees and has introduced unemployment benefits.
Albert Ballin was not available for comment.
TUI shares closed 3.6 percent higher at 6.72 euros.