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Analysis of an acquisition: ‘To Be or Not Be’ ’ Not a question, but rather an acquisition
Danish mega-carrier Maersk-Sealand makes an offer that RPONL’s major shareholders can’t refuse and the sets stage for a new era in container shipping.By George Lauriat, Edior-in-Chief, AJOT
Maersk Sealand’s proposed (and highly likely) purchase of RPONL (Royal P&O Nedlloyd Lines) will forever change the container shipping industry. With one swift thrust, Maersk Sealand will become not only the #1 containership operator in the world, the takeover will effectively make Maersk Sealand, more than twice as large as its nearest rival, MSC (Mediterranean Shipping Company). In doing so, the two containership alliances (Grand Alliance and CHNKY) will be forced to reevaluate their positions (see charts).
The bare bones of the deal are fairly straightforward. A.P. Moller, Maersk Sealand’s parent company, has made a cash offer of Eur 57 per share for RPONL. The price of Eur 57 per share is intended for the entire share capital of approximately Eur 2.3 billion (US$2.9 billion). The takeover will be triggered by acceptance by at least 70% of the shareholders. The offer memorandum is expected to be formally announced in June, and likely will contain conditions, including regulatory clearances. The offer excludes a payment of Eur 1 dividend per share to the shareholders of Royal P&O Nedlloyd NV already in the works.
According to an article published May 16th in the Financial Times, Philip Green, P&O Nedlloyd CEO Philip Green, who will lose his job once the deal is complete, said on May 15th that Maersk’s first approach had come about three weeks ago, and that the offer had been unsolicited. Nevertheless, the announcement of A.P. Moeller’s intended takeover was accompanied by support from RPONL’s board. Andrew Land, Chairman of P&O Nedlloyd said of the offer, “In this fragmented industry we believe these two highly complementary businesses will achieve far more together than apart. Their combined scale and know-how will create the world’s leading container shipping line and logistics provider. In addition, this proposed offer represents a significant premium to our share price. I sincerely believe this proposal is in the best interest of both our shareholders and our employees.”
Philip Green, CEO of P&O Nedlloyd dittoed his chairman’s endorsement saying, “The cash offer from Maersk represents full and fair value for P&O Nedlloyd shareholders and accordingly, the board of P&O Nedlloyd has no hesitation in recommending the offer to them.”
Besides being recommended by the board of RPONL the offer was endorsed by the largest shareholder, P&O. P&O has a 25% stake in RPONL and the company’s approval for the deal was critical to obtaining the necessary support to reach the 70% threshold needed for the takeover. Although P&O supported Maersk Sealand’s bid, P&O’s two board members, CEO Robert Woods and CFO Nick Luff, did not participate in the RPONL board’s discussions of the approach from Maersk and subsequently stepped down from the RPONL board, pending the outcome of the offer process.
Act 1: To be: Acquisition
The logic behind the purchase of the under-performing rival is a private matter that AP Moeller has likely been mulling over for sometime. In hindsight, it is easy to see why Maersk Sealand targeted RPONL for takeover. A number of events occurred that paved the way for the takeover. Easily the most important first step was the creation of RPONL itself. As a part of both P&O and Nedlloyd BV, any takeover attempt would be a convoluted process. The steamship line was a two-headed giant with widely disparate interests, yet an enormously powerful community of shareholders. When in 2004, the decision was made to create a separate company, Royal P&O Nedlloyd, the conditions for the future sale of the company were greatly simplified. Part of the creation of the new company involved P&O reducing its stake from 50% to 25%. This meant P&O was still the largest investor, but no longer controlled the company. The second largest investor is Norwegian shipowner John Fredriksen. Fredriksen,
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