NOL bids for German shipping group Hapag-Lloyd

Singapore - Neptune Orient Lines (NOL) has placed a formal bid for Germany's Hapag-Lloyd.

"It is an expression of interest which they have submitted and it is not binding," an anonymous source told Reuters.

NOL is currently the world's seventh largest container shipping firm while Hapag-Lloyd ranks fifth in the world. The merger will result in the creation of the world's third-largest container shipping firm behind Denmark's shipping giant A.P. Moller-Maersk and Mediterranean Shipping, a privately owned organisation.

Singapore sovereign fund Temasek Holdings owns 66% of NOL, making it the largest share holder while Hapag-Lloyd is part of Germany's TUI.

On 15 July, banking sources told Reuters that NOL is seeking up to US$7 billion in loans to finance the possible merger for Hapag-Lloyd.

However, "it is at this stage premature to state whether the indicative non-binding bid will lead to a definitive transaction", said NOL. The bid does not guarantee merger with Hapag-Lloyd as NOL is not the only organisation showing interest. A group of investors based in Hamburg has also shown interest in buying over Germany's top shipping group, keeping Hapag-Lloyd under German control. They mentioned that they had made a 'competitive' offer that analysts estimate to be more than US$7 billion.

In addition, NOL shares have dipped 1.89% to S$3.16 (US$2.34) and the uncertainty for the shipping industry is threatening NOL's bid for the German shipping group.

According to Reuters, analysts are pessimistic about talks of merger in view of an economic slowdown because they believe that this will magnify integration risks "associated with the potential acquisition of Hapag-Lloyd"