A crewman onboard the Atlanta, a container ship of Orient Overseas Container Line, a subsidiary of OOIL, on the main deck at the Modern Terminals area of the container port in Hong Kong. BLOOMBERG

New owner COSCO to operate shippers as two brands under one group

Hong Kong's No 1 container carrier Orient Overseas (International) Limited will retain its listing status and Hong Kong headquarters as it joins a two-brands-under-one group model following its acquisition by COSCO Shipping Holdings, the company announced on Monday.

COSCO, the biggest shipping company on the Chinese mainland, announced a month ago it was offering HK$49 billion ($6.27 billion) to buy OOIL, which was founded by former special administrative region chief executive Tung Cheehwa's family in 1969. The purchase will create the world's third-largest shipping line with more than 2.9 million standard containers and 400 vessels, surpassing French container, transport and shipping company CMA CGM Group.

Alan Tung Lieh-Sing, chief financial officer at Orient Overseas, said the acquisition was a careful and reasonable business decision for shareholders and the company, and details of the deal－including?operational arrangements and whether and how the Tung family would continue serving in management positions－were still under negotiation. The deal needed at least six more months to be completed.

State-owned COSCO offered HK$78.67 for each Orient Overseas share, a premium of 37.8 percent over the closing share price of HK$57.10 on July 9. After completion of the deal, COSCO shipping will hold 90.1 percent of Orient Overseas while Shanghai International Port Holding will hold the remaining 9.9 percent. COSCO shipping will be in talks with the Committee on Foreign Investment in the United States on the offer, according to Tung.

The shipping industry has been recovering profits and improving performance but has faced significant industrial consolidation amid changes in the demand and capital environment worldwide in the past three years, according to Tung. He believes the cost of shipping transport and volumes will increase in the future and is positive about development of the industry, which he believes has gone through a trough. But he concedes the industry will find it hard to restore the buoyant performance seen in 2000.

Orient Overseas reported net profit of HK$418 million in the first half of this year following a HK$442 million loss in the same period last year. Revenue increased 13.2 percent year-on-year to HK$22.6 billion and operating profit amounted to HK$197.3 million. Interim dividend was 16.7 Hong Kong?cents.

Dickie Wong, executive director of research at Kingston Financial Group, said the acquisition is a good result for both the companies and the shipping industry, and believes the integration of the two companies will stimulate the group's profitability, though he thinks it may take time for the two companies to develop synergies.