In the latest chapter to sell-off its debt ridden assets, Singapore’s S$266 billion (US$189 billion) sovereign wealth fund Temasek agreed this week to relinquish its 67% stake in shipping company Neptune Orient Lines (NOL) to French container shipping giant CMA CGM for an estimated US$2.4 billion.
Once clear of antitrust regulations, CMA CGM will launch an offer price of S$1.30 (US$0.92) per share which represents a 49% premium to NOL’s unaffected share price and a 33% premium to NOL’s three-month, volume-weighted average share price. This will be the biggest transaction for the container shipping industry since Maersk bought Royal P&O Nedlloyd NV for US$2.9 billion in 2005.
“This transaction will represent a significant milestone in the development of CMA CGM. Leveraging the complementary strengths of both companies, CMA CGM will further reinforce its position as a leader in global shipping with combined revenue of US$22 billion and 563 vessels,” states Rodolphe Saadé, vice-chairman of CMA CGM. NOL is currently being advised by Citi and HSBC on the deal.
Suffering from several years of losses, NOL had already been on the docket to be sold for some time. The sovereign wealth fund earlier in the year sold off NOL’s profitable logistics business to Japan’s Kintetsu World Express for US$1.2 billion.
“We are supportive of this transaction as it presents NOL with an opportunity to join a leading player with an extensive global presence and solid operational track record,” says Tan Chong Lee, head portfolio management at Temasek.
It’s been a busy cleanup year for Temasek, the fund earlier was able to sell its 83.8% holding in another unprofitable asset; STATS ChipPac (STATS) for US$1.9 billion this summer to Chinese firm Jiangsu Changjiang. In a deal that took almost five years to accomplish it represented Temasek’s commitment to exiting assets that were losing market share and recording eroding profit margins. The fund has been looking to de-risk its portfolio by reducing large positions in publicly listed companies and putting more money into private ones as it looks to improve its returns.
