French liner company CMA CGM has signed a binding deal with Danish counterpart Maersk Line to acquire Mercosul Line that operates in Brazil’s domestic container shipping market.

As explained, the acquisition of Mercosul Line would allow CMA CGM to strengthen its service offering to and from South America, most notably in Brazil, which was described as “a market with a strong potential for development, especially on cabotage and “door-to-door” services.”

CMA CGM said that the move forms part of its strategy to develop intra-regional sea transportation links and complementary services such as logistics.

The Mercosul transaction is subject to Brazilian regulatory approval and the closing of Maersk’s Hamburg Süd acquisition. At the earliest, the integration of Mercosul within CMA CGM will start at the same time as the Hamburg Süd integration, which is expected in Q4 2017. Until then, Mercosul Line will continue business as usual, a joint statement read.

“The transaction will ensure that the cabotage sector in Brazil remains competitive and that customers continue to benefit from a comprehensive choice of carriers,” the statement further added.

Maersk Line might have been prompted to sell the liner company as a way of making sure the relevant regulatory authorities approve the merger with the German carrier.

Namely, Hamburg Süd already has a subsidiary in Brazil, Alianca Navegacao e Logistica, which is a major cabotage carrier along the Brazilian coastline. Keeping Mercosul would have pushed Maersk’s control of South America East Coast’s cabotage to 80 percent.

To remind, Maersk Line said it would acquire Hamburg Süd for EUR 3.7 billion (USD 4 billion) on a cash and debt-free basis, which it plans to fully finance through an already secured syndicated loan facility.

The proposed acquisition received an approval from the US Department of Justice on March 23, 2017, while the EU Commission approved the deal on April 10, 2017, subject to conditions.

The acquisition still remains subject to some other regulatory approvals, however, Maersk said earlier that it expects to close the transaction by the end of 2017.

According to Rodolphe Saadé, Chief Executive Officer of CMA CGM, the acquisition of Mercosul represents a “milestone in CMA CGM’s development strategy in South America.”

“It is a well-managed company and we will leverage this platform to expand our footprint and service offerings to and from Latin America, seizing opportunities linked to the high growth prospects in this region.”

“ CMA CGM is a good fit for Mercosul and we are confident that they will continue to develop the company going forward,” says Søren Toft, Chief Operating Office, Maersk Line.

The parties have decided not to publicly disclose the price of the sale.

Launched in 1996 and acquired by Maersk in 2006, Mercosul Line has a fleet of four ships that operate in Brazil and South America. Mercosul employs 92 land based staff and 160 seafarers.

As disclosed by the duo, the company reported revenues of USD 128 million in 2016 and offers strong profitability.