Cross-straits marriage of Evergreen and OOIL?

Time: 2016-12-09 13:40
While the global container industry has embarked on a spree of pairings and menages-a-trois over the past 12 months, many of Asia's shipping lines have remained proudly single.
Conscious of their status as national champions and contemptuous of rivals' business prowess, Taiwan's Evergreen Marine Corp., Yang Ming Marine Transport Corp. and Wan Hai Lines Ltd. have kept aloof from the fray.
Six of the world's top 15 shipping lines will vanish once current mergers and bankruptcies are complete, according to Bloomberg.
Just 12 months ago, Evergreen had Asia's largest container fleet, and was the fifth-biggest operator worldwide. It's now been relegated to third place in the region after tie-ups between the major Chinese and Japanese lines, and is depending on a US$1.9 billion government relief package to keep itself above water.
The problem is, none of the potential love matches out there looks ideal.
Yang Ming has some overlapping trans-ocean routes that could be eliminated to increase market muscle, but its finances make even Evergreen's overstretched balance sheet look attractive.
Aggregate operating losses over the past five years amounted to NT$38.4 billion ($1.2 billion), almost twice Evergreen's NT$20.8 billion, while net debt of NT$80 billion outstrips Evergreen's NT$72.9 billion despite an operating and on-order fleet that's about half the size.
Even by the standards of the global shipping industry, Yang Ming's operating losses have been immense.
Wan Hai has a better model -- taking business at commercial rates, limiting itself to less-competitive intra-Asian routes and posting just three quarters of operating losses over the past five years. But it's hard to see what such a well-run company would want with a bloated giant like Evergreen, and its fleet isn't big enough to move the needle in an industry where scale is everything.
Long-distance romances can be difficult, but the best option may lie across the Taiwan Strait, in Hong Kong.
Adding Orient Overseas International Ltd.'s 97 ships to Evergreen's 189 would give a combined capacity of 1.57 million TEU, just a sliver behind merged mainland giant China Cosco Holdings Co.'s 1.58 million TEUs and ahead of the merged Japanese lines and the proposed tie-up between Hapag-Lloyd AG and United Arab Shipping Co.
Evergreen and Orient Overseas are already members of the Ocean Alliance grouping with Cosco and CMA CGM, so they shouldn't find it hard to work together.
Time, though, is of the essence. Of the 15 largest lines last December, only nine will be left as fully independent players once current mergers and bankruptcies play out.
Orient Overseas, controlled since its founding by the family of a pro-Beijing former Hong Kong leader, Tung Chee-hwa, may not be averse to falling into the arms of a bigger mainlander should Cosco come knocking. If Evergreen wants to prevent that sort of marriage it needs to act now, or forever hold its peace.
Contact:  Aster Chen
If you cant not get through by phone, please mail to the address above.