State-owned China Shipping Group has joined forces with France-based CMA CGM to bid for Canadian Pacific Ships (CP Ships), a move, experts say, which will greatly enhance the Chinese shipping giant's global network, as reported by Asia Pulse.
A department official at Shanghai-based China Shipping yesterday confirmed the information, but declined to be named and offered no further comment.
A division leader surnamed Zhang at CMA CGM Shanghai refused to disclose detailed information about the deal, saying the transaction is a "long-term move" by the Marseilles head office.
The Sino-French alliance is leading the bid for the Canada-listed but London-headquartered CP Ships, and a recommended bidder will be decided as early as the end of next month, an earlier Financial Times report said, without identifying the sources.
According to people familiar with the deal, the world's second largest shipping company after AP Moeller-Maersk, Mediterranean Shipping Company (MSC) is also in the bid for CP Ships.
CP Ships is smaller than the three bidders, with about 80 ships serving the Atlantic, Australia, Asia and Latin America. Its market value is estimated at more than 1.8 billion Canadian dollars (US$1.46 billion).
Industry analysts said the coming together of two Chinese and French companies to attempt the acquisition for the Canada-listed shipping firm is an attempt to reduce risks in capital and management, and will win more access for the two companies to attempt to earn CP Ships' favour.
Allen Lam, a senior analyst in logistics with Guotai Jun'an Securities (Hong Kong
) Ltd, said the joint offer should lower the financial risks of the acquisition, as both sides will shoulder part of the cost.
The proposed merger of three transnational shipping conglomerates will greatly boost the transportation capacity of the Chinese State-owned shipping company and the France-headquartered CMA CGM.
"In some routes where the two companies overlap, for example, some of the ships can be emptied out to explore new lines after the acquisition, which will mean an optimized reallocation of their existing assets," said Zhang Xiaomu, an industry analyst in shipping with the Beijing-based Anbound Consulting firm.
For the Chinese State-controlled China Shipping, the possible acquisition is expected to further broaden the China-focused company's world presence by adding an increasing number of sea routes, docks and vessels.
The lack of international shipping networks has been an obstacle for local Chinese shipping companies trying to expand their global business presence, according to Anbound's Zhang.