FRANKFURT/TEL AVIV: Germany’s Hapag-Lloyd announced on Monday that it will acquire Israel’s ZIM Integrated Shipping Services for $4.2 billion in cash, securing its position as the world’s fifth-largest shipping group.
But the deal sparked a backlash in Israel, with ZIM employees at its headquarters in Haifa going on strike and the city’s mayor calling on the Israeli government to block the deal.
Shares in Frankfurt-listed ZIM soared 50% following approval of the deal, which came a day after Hapag-Lloyd announced it was in talks to acquire ZIM.
Shares in Hapag-Lloyd fell 8% on news of the ZIM deal, which the company said would be financed with cash reserves and up to $2.5 billion in external financing.
“The merger will secure Hapag-Lloyd’s market position as the world’s fifth largest shipping company with a modern fleet of over 400 vessels,” the company said in a statement.
ZIM says on its website that it operates in more than 90 countries and serves 300 ports around the world.
In a related deal, Israeli private equity fund FIMI will acquire a business containing 16 vessels carved out of ZIM that will ensure direct global maritime connectivity for Israel.
FIMI and Hapag-Lloyd did not disclose financial terms of the nested transaction. Under the agreement, “golden shares” giving Israel special ownership of ZIM will be transferred to FIMI’s dedicated Israeli container line (called “new ZIM”).
ZIM said the price agreed with Hapag-Lloyd represented a 126% premium to the unaffected share price on August 8, before the first reports of acquisition interest.
ZIM management and others are in talks with labor union over strike
ZIM told Reuters that ZIM employees called for a strike at its headquarters in Haifa on Sunday over the deal, adding that management was in talks with the union to avoid any negative consequences and the strike was ongoing.
Yona Yahav, the mayor of Haifa, Israel’s largest seaport, told Reuters the deal undermined national security.
“Even if an Israeli investment fund is involved as an intermediary, transferring ownership into foreign hands is problematic to say the least,” he said.
Hapag-Lloyd CEO Rolf Habben-Janssen told reporters he understood the concerns but said the deal was compelling.
Israel’s competition authority said it would review the acquisition, which JPMorgan analysts said would allow Hapag-Lloyd to increase its global market share from 7% to just under 9% without increasing investment in a lengthy process. ZIM, valued at about $2.7 billion as of Friday’s close, announced in November that it had been considering strategic options for several months after receiving a non-binding acquisition offer.
“This appears to be a strategy to acquire additional capacity in the short term (in lieu of fleet capital investment)…shipyard delivery slots are not readily available in the short term,” JPMorgan said. (Reporting by Ludwig Berger in Frankfurt and Stephen Scheer in Tel Aviv; Additional reporting by Christoph Steitz and Matthias Williams; Additional writing by Tom Sims; Editing by Susan Fenton, Bernadette Bohm and Alexander Smith)
