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LONDON—Merger talks between German container-shipping operator Hapag-Lloyd AGand Dubai-based rival United Arab Shipping Co. are progressing well, and the companies will likely combine by the end of the summer, two people involved in the matter said.
“It’s a win-win situation and talks are ticking along quite well,” one of the people said. “Unless there is a last-minute snag, we will have a marriage by August.”
Hapag-Lloyd and UASC said in April they were in preliminary talks based on valuations that would give Hapag shareholders 72% ownership of any combined firm, and holders of UASC the rest. They are currently the world’s sixth- and 10th-biggest container operators in terms of capacity, and a merged entity would be the fifth-biggest.
“The combined company will be worth around $9 billion,” the second person said.
The talks come amid a wave of consolidation sweeping the container-shipping industry, which is squeezed by overcapacity, slowing global growth and plummeting freight rates. Amid those turbulent waters, a number of big companies in recent years have combined forces to cut costs and increase competitiveness.
At the same time, operators have been scrambling to form alliances, broad operational partnerships that have allowed them to cut costs without a full-blown merger or takeover.
Most of the world’s top dozen operators are part of alliances, the most recent of which includes Hapag-Lloyd and was completed earlier this month. UASC and debt-ridden Korean line Hyundai Merchant Marine Co. were the only two left out of the new groupings.
Their exclusion raised questions about their ability to compete effectively in the world’s most lucrative ocean trade routes.
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