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Published: 18 October 2008      

Hapag-Lloyd remains in German hands

TUI has sold Hapag-Lloyd in a deal worth €4.45B (US$6B) that keeps the shipping line in German hands. The deal is the biggest in the shipping industry since A P Moeller-Maersk, the world’s largest shipping line, bought Royal P&O Nedlloyd for €2.5B in 2005.

The “Albert Ballin” consortium, spearheaded by Klaus-Michael Kühne, Wolfgang Peiner (a former Hamburg senator for finance) and Christian Olearius, a partner of M M Warburg Bank, has thus emerged “victorious,” after Singapore’s Neptune Orient Lines (the early favourite) dropped out of the auction.

Other prominent members of the Alfred Ballin consortium include the City of Hamburg, HSH-Nordbank (the world’s largest ship finance institute) and insurance companies HanseMerkur and Signal-Iduna. The consortium will make TUI a cash payment of €1.4B for a two thirds stake in Hapag-Lloyd, while TUI will also take a one third stake valued at €700M in the consortium’s bid vehicle.

Should TUI wish to dispose of its shares before 2012, the other members have the right of first refusal.

In addition the consortium will take over some €2.3B in debt. Michael Frenzel, TUI’s CEO, will stay on as chairman of Hapag-Lloyd’s Supervisory Board.

Under German law, TUI had to remain a shareholder unless an outright sale of its interest were put to an EGM of the shareholders and approved by them. This would have handed Norwegian entrepreneur and leading shareholder John Fredriksen an opportunity to oppose the deal.

The “German solution” was clearly favoured by Hapag Lloyd’s own management. “I have fought hard for the company and the last eight months have not been easy, as we had to convince the members of the Hamburg consortium to invest in Hapag-Lloyd,” said the shipping line’s chairman Michael Behrendt.

“They [NOL] would have folded our company...I did not want to be the person who put the lights out...No matter what will happen, all jobs are safe and I see them as 100% safe for all of us.” Behrendt has now left the TUI Supervisory Board.

Hamburg’s senator for economics Axel Gedaschko also expressed his satisafaction with the outcome. “It was not easy for us to keep Hapag-Lloyd in is not a question of the jobs alone, but also a matter of our maritime cluster.”

Some 2000 of Hapag-Lloyd’s worldwide payroll is employed at the head office in Hamburg, so the business is a major contributor to the local and regional economy.

For Hamburg, the loss of Hapag-Lloyd was “unthinkable.” The consortium put it about that the port could lose the business of The Grand Alliance, which accounts for 40% of throughput.

“We had to consider how far we could go with our financial commitment,” said Klaus-Michael Kühne. “But a company with such standing and service quality [as Hapag-Lloyd] is important for Germany as the world’s leading exporter...I am happy that we have managed to keep Hapag-Lloyd in Hamburg where it belongs.”

NOL could easily have afforded to buy Hapag-Lloyd, but was unwilling to provide the commitments on jobs or take on the opposition to its takeover. The deal with the consortium exudes politics from its every pore. NOL has been criticised for failing to grasp the cultural and economic significance of Hapag-Lloyd to Hamburg’s self-identity and it added insult to injury when it said it would keep the Hapag-Lloyd brand name - as if it were placating a naughty child with candy.

But for its part the consortium is now exposed to the harsh realities of owning and operating a container shipping line at a difficult time for the industry.

Furthermore, although the consortium had a common aim of keeping out an unwanted foreign owner, its members may not share the same vision going forward.

Hapag-Lloyd operates 133 owned and chartered vessels with an aggregate capacity of 500,000 TEU. The line is represented in 130 countries with 320 sales and marketing offices. It is the fifth largest container shipping company worldwide. In the first half of this year the line carried about 2.8M TEU, equivalent to a 4% global market share.

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