German shipping liner Hapag-Lloyd’s shareholders has approved the creation of new authorized share capital to see through the planned merger with Arabian rival United Arab Shipping Co. (UASC).
At Hapag-Lloyd’s recent annual general meeting, shareholders gave the go-ahead to create the capital conditions required for the proposed merger.
“The shareholders therefore approved the creation of new authorised share capital. This is to be used for the merger with the liner shipping company UASC, which is to be incorporated into Hapag-Lloyd as a contribution in kind,” Hapag-Lloyd said in an official statement.
The shareholders also approved the expansion of the supervisory board from the current 12 members to 16, to take place once the merger is concluded.
This is designed to accommodate the current majority shareholders of UASC—Qatar Holding LLC and Saudi Arabia’s Public Investment Fund—with each to receive a place on Hapag-Lloyd’s supervisory board upon completion of the merger.
The merger is still subject to antitrust approvals. Hapag-Lloyd in a statement said it submitted the relevant applications soon after signing the business combination agreement.
The pending union was described by Rolf Habben Jansen, CEO of Hapag-Lloyd AG, as “another strategic milestone for Hapag-Lloyd.”
“This merger gives us the large vessels we need in order to achieve low transport costs per container. With the investments already made by UASC in these ship classes, Hapag-Lloyd will not need to make any more investments in large vessels in the next few years.”
He continued: “With this merger, we are consolidating our position among the world’s five biggest container shipping companies in the long term and are considerably increasing the gap between us and the shipping companies that come after us.”
The executive added that the combination is seen to significantly improve the firms’ profitability and “allow us to rise to the various industry challenges even better and more strongly than ever before.”
UASC’s huge losses revealed
Meanwhile, UASC is reported to have sustained an operating loss of US$299 million and a net loss of $384 million in 2015. Revenues for the last year reached $3.32 billion.
These figures were earlier provided by Hapag-Lloyd as part of the disclosures before its annual general meeting.
A negative operating margin of 9.0% has made UASC the worst performer among all main container carriers that have published financial results for 2015, according to Alphaliner. Previously, its financial records were not disclosed publicly, as the shipping line is privately owned by six Arab states.
Its poor financial performance has extended to 2016 with an operating loss of $132 million and net loss of $201 million on revenues of $1.53 billion in the first six months of this year.
UASC’s negative operating margin of 8.6% was only surpassed by the two struggling Korean carriers, Hanjin Shipping and Hyundai Merchant Marine, which reported January to June margins of negative 9.8% and negative 18.5%, respectively, for their container shipping divisions.
