Hapag-Lloyd, a German shipping company, announced on Monday that it would purchase Israel's ZIM for $4.2 billion. This will cement its position as the fifth-largest group in the world.

The deal was met with a backlash from Israelis, as ZIM employees at the Haifa headquarters went on strike, and the mayor of the city called on the Israeli government not to approve it.

Hapag-Lloyd confirmed the deal on Friday, a day after Hapag-Lloyd announced that it was in advanced negotiations to acquire ZIM.

Hapag-Lloyd's share price fell by 8% after the announcement of the ZIM agreement. The company said that it would fund this deal with its cash reserves as well as external financing of up to $2,5 billion.

The company stated that the merger would cement Hapag-Lloyd's position as the world's fifth-largest line of shipping with a fleet of modern vessels totaling over 400.

ZIM's website states that it operates in 90 countries and serves 300 ports around the world.

In a similar deal, Israeli 'private equity fund FIMI' will purchase a ZIM business that has 16 vessels and secures Israel direct global maritime ties.

FIMI, Hapag-Lloyd and Hapag-Lloyd have not disclosed the financial terms for this nested agreement, whereby a "golden-share" which grants Israel special ownership rights over ZIM will be transferred to FIMI’s dedicated Israeli container-line, which is to be named "New ZIM".

ZIM reported that the price agreed with Hapag-Lloyd represented a 126% increase over its stock price before initial reports about takeover interest on 8 August.

ZIM MANAGERS IN CONVERSATIONS WITH UNION ABOUT STRIKE

ZIM employees called a strike on Sunday at their headquarters in Haifa over the "deal", ZIM said, adding that the management was in discussions with their union to avoid any negative impacts and that the strike is ongoing.

Yona Yahav is the mayor of Haifa - Israel's largest port. He said that the deal "undermines national security".

He said that transferring ownership to foreigners, even with an Israeli investment fund as an intermediary is problematic.

Hapag-Lloyd's CEO Rolf Habben Jansen said he was aware of the concerns but that the deal he had negotiated was a good one.

Israel's Competition Authority said that it would examine a takeover. JPMorgan analysts stated that the deal would allow HapagLloyd increase its global share from 7% to just under 9%, without needing to invest in a long-drawn-out process. ZIM was valued at $2.7 billion by Friday's closing. In November, it said that after receiving a non-binding acquisition proposal, it had spent several months reviewing its strategic options.

"This could be viewed as a "play" to gain additional capacity near-term (instead of fleet capex). JPMorgan stated that delivery slots at shipyards were not available in the near future. (Reporting from Frankfurt by Ludwig Burger and Tel Aviv by Steven Scheer; Additional reporting and writing by Tom Sims, Editing by Susan Fenton and Bernadette baum and Alexander Smith; Additional writing and editing by Susan Fenton and Bernadette Baum)

(source: Reuters)