Market rife with NOL merger talk - OOIL, Hapag-Lloyd top suitors

NOW that Singapore's sovereign wealth fund, Temasek, appears ready is to sell Neptune Orient Lines, the market has been rife with merger talk with Hong Kong's Orient Overseas International Ltd (OOIL) and Hamburg's Hapag-Lloyd being leading candidates.

As Lloyd's List put it: "To paraphrase Jane Austen, it is a truth universally acknowledged that a single container line in possession of a fortune must be in want of a suitor."

NOL was in merger talks with Hapag-Lloyd back in 2008, but investors became gun-shy when the market crashed later that year.

Hapag-Lloyd has since merged with CSAV, which created the fourth-largest shipping line after Maersk, Mediterranean Shipping Co and CMA CGM. A Hapag merger may look better now.

Of the OOIL candidacy, Barclay's Capital analyst Jon Wyndham said: "The potential for an OOIL and NOL merger is interesting, as they have similar fleet sizes, but NOL is more focused on the transpacific trade, while OOIL is more geared towards intra-Asia."

NOL with its 603,000 TEU in its principal holding, APL, is bigger than OOIL with its 530,000 TEU in its principal holding, OOCL.

NOL's sale of its logistics unit to Japan's Kintetsu Express for US$1.2 billion, announced in February, trimmed the company down to its core business of box shipping.

Japan's NYK and MOL have also been mentioned as suitors. Japanese companies, with limited growth prospects at home, are investing in overseas assets. In addition to Kintetsu's buyout of APL Logistics, Japan Post snatched up Australia's Toll Logistics for $5.1 billion in February.

Some say a bid for NOL would make sense now, following the APL Logistics divestment, because MOL or NYK could buy the Singapore line without overlap with its substantial logistics operations.