Beijing has ordered two of China’s leading container lines – China COSCO and China Shipping group – to merge in a bid to recover from a slump in the industry, according to the South China Morning Post.
The proposed merger is expected to be a rather complicated process due a tangle of stock listings and distinct earnings records. However, rumours have already sparked a share price jump from between 10% and 24%.
One source for companies said: “Unlike the merger between China CNR and CSR, which took a bottom-up approach to pen a deal and were combined via an asset swap at the listed companies’ level, the shipping companies will have to study a top-down avenue, consolidating the parent companies first.”
A second source was reported as saying: “Unlike train making, China’s shipping companies operate in a global market. A government-ordered merger will definitely raise alarms to competition authorities worldwide.”
China Cosco has recently been involved with the order of ten 19,000 TEU ships at a total cost of US$1.4 billion in a bid to dominate the world’s busiest trade lanes.
China Cosco and CSCL rank as the world’s sixth and seventh largest respectively by fleet size but are said to belong to different operational blocks.