Hapag-Lloyd and United Arab Shipping Company (UASC) have signed a long-expected business combination agreement to merge both companies.

Besides the business combination agreement (BCA) between the two companies, a shareholders support agreement was also entered into by key parties in which some of the controlling shareholders on both sides have committed to backstop a cash capital increase in the amount of $400 million within six months after the closing of the transaction.

Following the integration, the new Hapag-Lloyd will rank among the five largest container shipping lines in the world, with 237 vessels and a total transport capacity of around 1.6 million TEU, an annual transport volume of 10 million TEU, and combined revenues of $12 billion.

CSAV, HGV (City of Hamburg) and Kühne Maritime will remain controlling shareholders of Hapag-Lloyd. The majority shareholders of UASC, Qatar Holding and The Public Investment Fund of the Kingdom of Saudi Arabia, will become new key shareholders of Hapag-Lloyd holding 14 percent and 10 percent respectively.

“This strategic merger makes a lot of sense for both carriers as we are able to combine UASC’s emerging global presence and young and highly efficient fleet with Hapag-Lloyd’s broad, diversified market coverage and strong customer base,” said Rolf Habben Jansen, CEO of Hapag-Lloyd. “Furthermore it will give the new Hapag-Lloyd access to ultra large container vessels, upon signing the agreement. After the successful integration of CSAV which was concluded mid of 2015 this transaction with UASC is another historic milestone for Hapag-Lloyd. The merger reinforces our position as a top five and one of the largest truly global carriers in liner shipping.”

The combined company will have a global, diversified trade portfolio, with leading product offerings in the major East-West and North-South trades. In addition, it will leverage on UASC´s solid presence in Middle Eastern markets and trades, with a commitment to further strengthening this presence by establishing a fifth Hapag-Lloyd regional center in Dubai.

“With this merger, we are embarking on an exciting new phase of UASC´s growth”, said Jorn Hinge, President and CEO of UASC. “Leveraging on UASC´s heritage in the Middle East as well as our recent growth in other markets, the combined company will provide customers with valuable expertise and very efficient service offerings in all major trade lanes and markets around the world.”

The fleet of the combined company will consist of 237 ships, including UASC´s six recently received 18,800 TEU ships, as well as eleven newly built 15,000 TEU ships, the last of which will be delivered soon. With an average age of 6.6 years and average size of 6,600 TEU the combined company will have one of the most modern and efficient vessel fleets in the industry.

The company will be a key player in the new THE Alliance, consisting of Hanjin, Hapag-Lloyd, K-Line, Mitsui O.S.K Lines, Nippon Yusen Kaisha and Yang Ming. THE Alliance is scheduled to begin operation in April 2017 and will cover all East-West trade lanes including Asia-Middle East/Arabian Gulf and Red Sea.

“Hapag-Lloyd and UASC now take the next step to further consolidate and shape the liner shipping industry,” said Michael Behrendt, Hapag-Lloyd’s chairman of the board. “The new transaction is strengthening not only our market position, but also our service portfolio. The merger will create annual net synergies of at least $400 million and save a significant amount of capital expenditure for the company.”

“During its 40-year history, UASC has grown from a regional carrier to become a truly global one with comprehensive coverage of the main trade lanes and a state-of-the-art fleet”, stated Dr. Nabeel Al-Amudi, Chairman of the Board of Directors of UASC. “We are very proud of UASC´s achievements over the years that paved the way for such a remarkable deal.”

Following regulatory and contractual approvals, the merger is expected to be completed by the end of 2016. Until then, UASC and Hapag-Lloyd will continue to operate as stand-alone companies. Each company will also operate in its own alliance as currently structured until the end of March 2017, after which THE Alliance will commence operations.