Neptune to be major global carrier

Neptune to be major global carrier

SINGAPORE (Reuter): Neptune Orient Lines Ltd (NOL)'s US$825 million takeover of U.S. container carrier APL Ltd will make NOL a major global carrier with more clout on the trans-Pacific route, NOL officials said yesterday.

"We will be enhancing our shipping coverage and raising our position as a global carrier since a lot of our customers are global," Lua Cheng Eng, NOL's chief executive officer, said at a media briefing on the merger.

NOL officials said it was the biggest takeover yet by a Singapore company.

But NOL chairman Herman Hochstadt warned the purchase will hurt the company's profits for 1997. He declined, however, to give details on the costs to NOL of the merger.

Hochstadt said NOL's market share of trans-Pacific trade would be slightly more than 10 percent after the merger, from its very low base currently.

APL is one of two U.S. container carriers. The other is Sea- Land.

"We feel the two companies through the merger have lots of synergies. Once put in place, the services offered by both will complement in many ways. We'll have a better end product," said Hochstadt.

NOL's turnover is expected to be boosted to Singapore $6 billion (US$4,2 billion) when the merger is completed by the third quarter of this year, from S$1.93 billion in 1996.

Under the deal with APL, signed over the weekend, NOL would buy all 24.6 million outstanding APL shares at US$33.50 each, making APL a wholly-owned subsidiary.

NOL has been looking for a "dance partner" in the shipping industry since last year, said Lua.

He said APL was finally chosen due to a strong complementary fit to NOL's presence in Southeast Asia, Australia and along the Far East-Europe route.

"APL is very strong across the trans-Pacific trade. It is a market leader there. They have many terminals and we can leverage on that. It will help bring our costs down," said Lim How Teck, NOL's deputy chief executive officer.

Both companies, which will have a combined fleet of 113 vessels, are expected to enjoy cost savings of at least US$130 million per year following the rationalization of their operations.

The restructuring of the companies will take about 18 to 24 months, said Lua. He declined to give details of likely changes, except to say both companies will continue to operate under their existing names.

The proposed union between the companies is subject to approval by APL's shareholders at a meeting to be held in two months.

Approvals also are needed from various regulatory bodies.

NOL said the Stock Exchange of Singapore has granted it a waiver from obtaining shareholders' approval for the merger as the deal is considered part of NOL's core business strategy.

Hochstadt said the takeover would have a negative impact on NOL's earnings for 1997.