China's Mega Shipping Merger Moves a Step Closer

 

According to sources, the companies would release an outline plan within three months.  Chinese business magazine Caixin reported on its website late on Monday that the central government had urged the firms to draft a preliminary merger plan within three months, beginning from August, citing an unnamed Cosco executive.

 

The report said the firms would set up a five-member working group to consider the merger plan, with three members from China Shipping and two from Cosco. China Shipping's chairman, Xu Lirong, would head the team, it said.

 

Multiple “sources close to the deal” are being quoted by Chinese and foreign media, said that the merger is being planned by a five-member team, led by China Shipping Group chairman Xu Lirong.

 

The stock exchange filings from both Cosco and China Shipping to the Shanghai and Shenzhen stock exchanges said, "trading in the shares of the company will be suspended with effect from 9.00 a.m. on 10 August 2015 pending the release of an inside information announcement relating to the plan by the controlling shareholder of the company (Cosco/China Shipping ) for a significant transaction which involves the companies.”

 

The potential merger would make the newly formed Chinese carrier the top player in shipping laden containers from Asia to the United States, according to an analysis of PIERS data.

 

Cosco and China Shipping are currently the world's sixth and seventh largest container shipping firms, respectively, according to consultancy Alphaliner.

 

The combining shipping lines would create economies of scale, allowing the merged company to compete with bigger rivals such as AP Moeller-Maersk in the race to export items around the world.

 

Globally, shipping lines have been cutting costs, selling assets and strengthening partnerships to curb losses amid a slump in rates since 2011 caused by too much capacity.