- More Shipping Firms to Merge in 2017
Indications have emerged that more mergers and acquisitions of shipping companies would be sealed in 2017, just as the cost of operations keep soaring.
Besides, growing level of merger of shipping firms showed that the worth of the container consolidation among the five majors currently estimated at $33.4 billion will soon soar with more agreement coming on stream in the New Year.
A recent Fitch Rating showed that muted demand growth would exacerbate overcapacity for the shipping sector in 2017, putting pressure on freight rates and driving further consolidation and defaults.
Fitch expects performance in all segments to be under pressure and has therefore maintained its negative outlook for the sector.
With the persistent crash in the container shipping business, world biggest shipping companies are losing billion of dollars. While some (including Hanjin Shipping) have liquidated, many more firms are finding solace in mergers.
The consolidation moves will further strengthen the capacity of the shipping firms and allow them to stay afloat in business. However, a number of seafarers will be layed off in the repositioning process.
Meanwhile, tanker shipping will face slightly less stress than dry bulk and container shipping, according to Fitch.Many container shipping and tanker shipping companies had sufficient cash to cover short-term maturities at their most recent reporting date, but they are still reliant on uninterrupted access to bank funding to cover negative free cash flow. This funding is even more critical for companies that are not able to cover their upcoming maturities.
Therefore, the filing for receivership in August by Korea-based Hanjin Shipping, the seventh-largest container shipping company in the world, may have far-reaching ramifications, according to Fitch.
In particular, creditors’ withdrawal of support may indicate a reassessment of the financing landscape, where secured bank funding for new vessels has remained relatively accessible even as market conditions have deteriorated.
Fitch expects more Mergers And Acquisitions (M&A) activity and defaults in the short and medium term. But these will only restore equilibrium and boost freight rates if they prompt capacity reduction.
In container shipping Fitch expects consolidation to affect companies across the entire segment, with smaller operators focusing on survival through increasing scale while market leaders such as Maersk Line defend their market position through M&A.
The latest statistics revealed by Vessle Value tagged: “2016 Container Consolidation” stated that these top five fleets are currently worth $33.4 billion and account for 33 per cent of the entire container fleet.
Senior Analyst at Vessel Value, William Bennett, gave the breakdown as; Moller Maersk AS/ Hamburg SUD has total value of $49.9 billion with 319 vessels holding 9.7 per cent of the total global fleet; China Cosco Holdings Co. is valued $47 billion with 190 vessels and 6.9 per cent market fleet; CMA CGM/APL is valued $46 billion with 150 vessels and six per cent market fleet. Also is Hapag-Lloyd/ UASC/ CSAV worth $5.4 billion with 123 fleets and 5.3 per cent of total fleet; and MOL/NYK Line/ K Line valued at $5.1 billion with 129 vessels and 5.2 per cent of market fleets.
According to the statistics, Maersk has paid roughly $4 billion for Hamburg Süd whose fleet is worth $1.5 billion. The deal is expected to complete end 2017. Entry of Hamburg Süd into the 2M alliance will put the alliance into the lead with 15 per cent of global capacity.
The Chinese state cabinet approved the merger of COSCO and China Shipping back in December of 2015. China COSCO Holdings have the largest fleet on order with 29 ULCVs and 4 post-panamax containerships. The Chinese owned container fleet is the most valuable at $17.6 billion and accounts for around 17 per cent of the market.
The largest acquisition in the French giant’s history, CMA CGM acquired Singaporean company. Recently it was also confirmed that APL would join CMA CGM in the Ocean Alliance which will subsequently represent 14 per cent of global container capacity, second only to the 2M alliance. The acquisition will make the combined fleet the 3rd most valuable in the industry.
Hapag-Lloyd completed their integration of Chilean line CSAV earlier this year. The new merger will bring Hapag-Lloyd’s average age down to 7.8 years from 8.7 years. Hapag-Lloyd and UASC will be the fourth most valuable fleet up from 10th and 8th, respectively.
One of the more recent mergers to be announced is that of MOL, NYK and K Line. Only the container businesses of these companies will merge and the consolidation is expected to be complete by 2018. The most valuable Japanese container fleet is Shoei Kisen valued at USD 3.0 billion and ranked 8th. In comparison, none of the other Japanese entities feature in the top 10 most valuable container fleets. The merger shows that consolidation can be used very effectively in the container industry to create a large footprint with only mid-size lines. The new arrangement makes the merged entity the 5th most valuable at $5.1 billion.
Tony Elumelu Acquires Shell, Total, ENI Stakes in OML 17
Tony Elumelu owned Heir Holdings Limited and its related company Transnational Corporation of Nigeria Plc on Friday announced it has completed the purchase of 45 percent stake in Oil Mining Lease (OML 17) through TNOG Oil and Gas Limited.
The acquisition includes all assets of Shell Petroleum Development Company of Nigeria Limited (30 Percent), Total E&P Nigeria Ltd (10 percent) and ENI (five percent) — in the lease.
It was further stated that TNOG Oil and Gas Limited will also have the sole right to operate OML 17.
The field presently has a production capacity of 27,000 barrels per day. Also, there are estimated 2P reserves (proven and probable) of 1.2 billion barrels and an additional one billion barrels in possible reserves — all of oil equivalent.
A consortium of global and regional banks and investors provided a financing component of $1.1 billion for the largest oil and gas financing in Africa in over a decade.
In a statement released on Friday, Shell said the completion was after all the necessary approvals have were received from authorities.
“A total of $453m was paid at completion with the balance to be paid over an agreed period. SPDC will retain its interest in the Port Harcourt Industrial and Residential Areas, which fall within the lease area,” the SPDC said.
Speaking after the completion of the deal, Elumelu said “We have a very clear vision: creating Africa’s first integrated energy multinational, a global quality business, uniquely focused on Africa and Africa’s energy needs. The acquisition of such a high-quality asset, with significant potential for further growth, is a strong statement of our confidence in Nigeria, the Nigerian oil and gas sector and a tribute to the extremely high-quality management team that we have assembled.
“As a Nigerian, and more particularly an indigene of the Niger Delta region, I understand well our responsibilities that come with stewardship of the asset, our engagement with communities and the strategic importance of the oil and gas sector in Nigeria. We see significant benefits from integrating our production, with our ability to power Nigeria, through Transcorp, and deliver value across the energy value chain.
“I would like to thank Shell, Total and ENI, for the professionalism of the process, the Federal Government of Nigeria, the Ministry of Petroleum Resources, and the NNPC for the confidence they have placed in us.”
Tony Elumelu is the Chairman of Heirs Holdings Limited, Transcorp and United Bank for Africa Plc.
Exporters Say CBN Pre-export Requirements is Frustrating Export of Goods
Exporters have said the recently introduced pre-export requirements by the Central Bank of Nigeria is creating unnecessary bottlenecks for exporters and the movement of goods out of the country.
Exporters, who spoke under the aegis of the Network of Practicing Non-oil Exporters of Nigeria (NPNEN), said the electronic Nigeria Export Proceed Form now required by financial institutions from exporters had come with so many challenges.
Ahmed Rabiu, the President, NPNEN, explained that the new policy had several requirements that often led to delays and loss of income on the part of exporters.
He said, “We acknowledge the CBN’s desire to ensure that all exports out of Nigeria are documented in order to ensure that the proceeds of such exports are repatriated.
“However, the reality on the field shows that the process is causing undue delays and consequently, encouraging corruption.”
According to them, in the new pre-export requirements, the Central Bank of Nigeria wants an export transaction to be initiated through eNXP processing on the trade monitoring system.
After which exporters are expected to have a pre-shipment inspection agent, the Nigeria Customs Service and other designated government agencies carry out their pre-export inspections.
The exporters said the pre-shipment inspection agent was expected to issue a clean Certificate of Inspection while Customs would issue the Single Good Declaration. All these they said takes time and delay goods from leaving the country on time.
Pointing to a recent report, they said about N868 billion worth of goods bound for export were stuck at the ports due to the new policy.
Speaking further Rabiu said, “For example, for the PIA to issue the CCI, the exporter is required to upload a certificate of origin as one of the supporting documents for the eNXP.
“The PIA is also required to upload the CCI to the TRMS(M) and until this is done, the Customs service will not issue the Single Good Declaration.”
He added, “After issuing the SGD, the customs is further required to upload it into the TRMS before the goods are allowed to be gated into the port and loaded on the vessel by the shipping line.”
Ardova Plc in Talks to Acquire Enyo Retail and Supply Limited
Ardova Plc, Nigeria’s leading integrated energy company, has commenced discussions to acquire Enyo Retail and Supply Limited.
According to the statement issued and signed by Oladehinde Nelson-Cole, Ag. Company Secretary/General Counsel, Ardova Plc, Enyo is one of the newest and fastest-growing retail and supply companies in the downstream sector.
It stated, “This announcement is pursuant to the acceptance in principle of AP’s offer and acquisition framework by the shareholders of Enyo, it is subject to the successful completion of a due diligence exercise and the receipt of all required regulatory approvals.”
“This announcement is pursuant to the acceptance in principle of AP’s offer and acquisition framework by the shareholders of Enyo, it is subject to the successful completion of a due diligence exercise and the receipt of all required regulatory approvals.”
Speaking on the yet to be completed deal, Mr. Olumide Adeosun, CEO, Ardova Plc, said upon completion, Ardova will retain the Enyo branded stations which will operate side by side with the Ardova brand while simultaneously leveraging on the strengths of Ardova and its group companies.
He added that the two companies are determined to conclude the deal by the end of Q1 2021.
Enyo presently operates over 90 stations across the nation and attends to over 100,000 retail customers on a daily basis.
Ardova Plc and Enyo Retail & Supply Limited promised to furnish stakeholders with more information on the progress of the deal.
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