A prospectus setting out details of Hapag-Lloyd Container Line, that is now up for sale, states that the trademark will only be available under license from Tui.
That concession will expire at the end of 2011, with no guarantee of renewal, Lloyd’s List has learned.
Tui is thought to want to keep the name for its cruise business and airline, with passengers far more brand-conscious than cargo shippers.
The decision has met with a mixed reception in industry circles. One liner shipping executive questioned the condition set by Tui and predicted that it would become a bargaining point. But an investment banker expressed no surprise at all, arguing that brands have little value in container shipping.
However, front-runner Neptune Orient Lines kept the APL identity when it acquired the US container line in 1997 in order to protect the loyalty of American customers. Furthermore, Hapag-Lloyd is regarded as a very good name that commands a following among Germany’s powerful shippers.
The list of potential buyers for Hapag-Lloyd is seen as quite slim, with most of the world’s top 20 lines discounted for a variety of reasons.
Apart from NOL, few other names are being seriously linked with Hapag-Lloyd, although Maersk Line has appointed advisers to have a look at the company. An outsider being mentioned by one or two well-placed observers is Israeli line Zim, which wants to return to the world’s premier division, and has deep-pocketed shareholders.
But a private equity buyer has been ruled out by some experts because of the inability to obtain synergies and associated cost-savings. Neither is the so-called Hamburg solution regarded by most as a serious option.
The prospectus paints a particularly rosy picture of Hapag-Lloyd’s future and the industry outlook at a time when conditions are weakening, and trade buyers are likely to treat some of the numbers with scepticism. It also boasts about the line’s position as number one on the Atlantic, and good IT systems.
A scenario of rising freight rates is set out, with the global average forecast to increase from just over $1,400 a teu in 2007 to almost $1,685 by 2010, but does not distinguish between headhaul and backhaul legs. On the Pacific where the more important eastbound rates are currently under pressure while outbound rates are increasing, the prospectus forecasts an overall recovery from around $1,450 per teu in 2007 to $1,680 this year.
Rather than depreciated book value, ships in the fleet have been transferred to Hapag-Lloyd at market value, a figure that could come to look high should today’s strong secondhand prices soften. Hapag-Lloyd’s slot capacity is forecast to grow from 5.5 teu in 2007 to 6.7m teu by 2010. The sales pack also quotes a much lower bunker price than the one lines are currently confronting.
No asking price for has been published, but Tui is thought to be after an enterprise value of €5bn, a figure regarded by trade sources as on the high side, given liner shipping prospects as consumer demand weakens in North America and Europe.
While experts are challenging some of the assumptions in the prospectus, they nevertheless say a takeover would be the only way for a line like NOL to gain market share fast, having been on the slow side to order ships.
As well as the container shipping business, the new owner would also acquire a 25.1% stake in the Hamburg’s Container-Terminal Altenwerder, and 20% of Montreal Gateway Terminals.
The banks handling the Hapag-Lloyd sale on behalf of Tui are Citi, Deutsche Bank and Greenhill.