Dubai-based shipping company United Arab Shipping Company (UASC) is going to decide on the business combination agreement with German counterpart Hapag-Lloyd AG (HL) at the beginning of next month.
To that end UASC has today called an extraordinary general meeting for 2 June 2016 “in which the shareholders shall, amongst other agenda items, vote whether to approve the conclusion of a business combination agreement with Hapag-Lloyd AG (HL),” Hapag-Lloyd said in an announcement.
The talks between HL and UASC regarding a potential combination of their respective container shipping operations were confirmed in April, however no binding agreement has yet been reached.
“In case of a business combination, the parties are basing their discussions on a relative valuation of the two businesses at 72% (HL) and 28% (UASC),” HL said earlier.
The move would also provide the German company access to some of the biggest containerships plying the international waters today, as UASC has six 18,800 TEU ships being built at Hyundai Heavy Industries, headed by Barzan, the container shipping industry’s first LNG-ready ultra-large container vessel already delivered.
The potential transaction is subject to the approval of the regulatory authorities, the relevant bodies at HL and other stakeholders. Its implementation is also subject to the approval of HL’s shareholders.
The move is believed to be driven by the ever growing need for consolidation within the container shipping industry amid fleet oversupply that has pushed rates to the rock bottom.
Hapag-Lloyd has already partnered up with some of the major carriers in what is dubbed as the third carrier alliance, The Alliance, set to enter the market in 2017. These include Hanjin, “K”Line, Mitsui O.S.K. Lines, Nippon Yusen Kaisha and Yang Ming.
UASC is anticipated to become part of The Alliance once the merger talks are concluded.
Its joining is expected to increase the overall alliance capacity to more than 4 million TEU.