Strategy

Maersk Line Buys German Rival Hamburg Süd

The deal is part of a wave of consolidation in the container industry amid low freight rates that have driven down shippers' profits.
Matthew HellerDecember 2, 2016
Maersk Line Buys German Rival Hamburg Süd

Danish container giant Maersk Line is adding to its share of global seaborne freight by acquiring smaller German rival Hamburg Süd, which is particularly strong in “north-south” shipping that serves Latin America and Oceania.

The deal continues a wave of consolidation in the container industry as shippers fighting to remain profitable amid the longest down-cycle in decades. Terms were not disclosed but The Wall Street Journal, citing people familiar with the negotiations, said Maersk will pay roughly $4 billion to acquire Hamburg Süd from Germany’s Oetker Group.

Hamburg Süd, the world’s seventh-largest shipper, had $6.7 billion in revenues last year, most of which came from container shipping. The acquisition will boost Maersk’s market share from 15.7% to 18.6% of global container trade.

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“With the addition of Hamburg Süd we will become the leading player in trades in and out of Latin America,” Maersk CEO Soren Skou told the WSJ.

As The Financial Times reports, Maersk has “long been reluctant to do big acquisitions following the botched integration of its last big deal, the 2006 purchase of P&O Nedlloyd. It changed tack in September as part of a big strategic overhaul that will see its parent company — conglomerate Maersk Group — spin off its oil business.”

The container industry is operating at an estimated 30% above demand and the crisis claimed its first big name victim in August when Korea’s Hanjin Shipping declared bankruptcy.

“My expectation would be that you will continue to see consolidation in the container industry in the coming years. There’s low growth, excess capacity, low freight rates,” Skou told the FT.

After the recent flurry of consolidation, Hamburg Süd was one of only two big container lines left without a partner. It operates 130 container vessels and has a 25% share of all shipments in and out of Brazil.

The family-operated Oetker Group had resisted takeover attempts for years. “Giving up our engagement in shipping after an 80-year-long ownership in Hamburg Süd was not an easy decision for my family,” August Oetker, the family’s patriarch, said.

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