Hamburg lines up against shipping power

Listen to this article

00:00
00:00

The imposing Hamburg headquarters building of Hapag-Lloyd, overlooking a stretch of water on the city’s Ballindamm, is more than just another corporate building for the city.

As the global base of a major container line, it is the visible tip of a vast iceberg of maritime businesses in Hamburg, mainly the funds – known as KGs from kommanditgesellschaft, the German name for the funds’ legal structure – that own a high proportion of the world’s shipping fleet.

The line is also widely seen as a vital asset for Germany in its position as the world’s largest exporter.

As a result, it has been a source of real shame and unhappiness among those linked to Hamburg’s shipping sector that Hapag-Lloyd could be sold to a company based elsewhere, probably Singapore’s Neptune Orient Lines (Nol).

It is far less surprising than it would be in many other places that the city’s state government has expressed its intention to back a bid intended to keep Hapag-Lloyd’s management based in the city.

The name of the company being set up for the bid – the Albert Ballinn Management Company for Hamburg Seafaring Investment – refers, like the Ballindamm street name, to the Hamburg-born founder of a company now incorporated into Hapag-Lloyd.

Even before Hapag-Lloyd is officially for sale – it is still subject to a strategic review by the advisers to Tui, its Hanover-based parent – the planned bid looks set to make it more difficult for Nol, the frontrunner to buy Hapag-Lloyd, to acquire the line at a reasonable price.

Until now, Nol had been the only major contender.

On Tuesday, Tui would say only: “We fundamentally appreciate the interest from Hamburg’s state government.”

However, people involved in the sale process for the line insist the planned Hamburg consortium will be treated the same as every other potential bidder for the line and will need to beat others in the race on price.

The question is whether Hapag-Lloyd’s importance to the Hamburg-based investors set to fund the likely bid is sufficient to outweigh Nol’s desire to expand after a near-decade when it has grown more slowly than most of its competitors.

“If the government of Hamburg believes that keeping Hapag-Lloyd in Germany is important, may they write a very large cheque,” one person involved said Tuesday.

The appeal of Hapag-Lloyd for a potential trade buyer is as simple as the sense of local pride that has fired the Hamburg bid.

The line – world number five by capacity – is the only sizeable container line likely to come up for sale in the foreseeable future.

All its bigger competitors – Denmark’s Maersk Line, Geneva-based Mediterra-nean Shipping Company, France’s CMA CGM and Taiwan’s Evergreen Marine – are controlled by family shareholders unlikely ever to sell.

The next five lines – China’s Cosco; APL, Nol’s container brand; China’s CSCL and Japan’s NYK and Mol – are all either state-controlled or, in the two Japanese lines’ cases, owned by shipping conglomerates unlikely ever to sell.

Many container lines are consequently likely at least to show interest in the company.

Yet it remains hard to see how Nol, which declines to comment, can allow itself to lose out on the purchase of Hapag-Lloyd.

The company missed out in 2004 on buying P&O Nedlloyd, then world number three line, after making too timid an approach for the line, which was later bought by Denmark’s Maersk.

Nol’s majority owner, Temasek, the Singaporean state investment fund, has said that transport and logistics are a key sector for the island state and it has made no secret of its desire to grow by acquisition. Thomas Held, the current Nol chief executive, will not want to suffer the fate of David Lim, the chief executive who lost his job after the failed attempt to buy P&O Nedlloyd.

The company believes that its size – it is the world’s number eight container line by capacity – is hampering its ability to win customers.

On top of its own determination, Nol may benefit from other lines’ scepticism about making purchases.

Maersk Line is still recovering from the chaos that engulfed it after it failed to integrate its computer systems properly with P&O Nedlloyd’s.

CC Tung, chief executive of Hong Kong’s Orient Overseas International, another potential buyer, has expressed doubts about how well takeovers work in an industry which is dependent on smooth-working information technology. The Hamburg group will consequently need to be prepared to deal with a line that knows it will never have a better opportunity to fulfill a key strategic objective.

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't copy articles from FT.com and redistribute by email or post to the web.