Hapag-Lloyd, UASC Merger on Hold
The merger of Hapag-Lloyd and United Arab Shipping Company (UASC) has been halted. The German shipping line and some banks involved in the deal are seeking assurances that UASC’s top shareholder, Qatar, remains committed to the deal for the long term, according to a report from Reuters.
Hapag Lloyd Chief Executive Rolf Habben Jansen told a news conference he had underestimated the complexity of the multibillion dollar deal, which will create one of the world’s largest shipping lines. The transaction is estimated to be worth $7.6 billion to $8.7 billion.
Hapag-Lloyd earlier this month postponed the completion date of the merger to May 31 from March 31, but said the deal was not at risk. The company also stated that operations of THE Alliance would start on April 1, regardless of the closing date.
According to the Reuters report, Hapag Lloyd and some of the banks wanted to make sure that Qatar won’t lower its stake in the combined group in the future. The concern is that Qatar could sell shares to rival shipping groups.
Qatar, through Qatar Investment Authority (QIA), one of the world’s largest sovereign wealth funds, holds a 51-percent stake in UASC, Saudi Arabia has 35 percent, while the rest is owned by the United Arab Emirates, Bahrain, Kuwait, and Iraq. Qatar will hold 14 percent in the merged entity Saudi Arabia will have 10 percent. Hapag Lloyd and the banks are seeking a commitment that QIA not would sell shares.
Reuters also reported that another factor slowing the deal is the proposed sale of United Arab Chemical Carriers (UACC), which is necessary under the terms of the merger. UASC is the biggest shareholder in UACC. If no buyer is found, QIA might acquire shares in UACC. UACCis valued at $150 million.