Merger of Hapag Lloyd, Gulf shipper said to hit snag

Hapag-Lloyd AG. (Christian Charisius/AFP/Getty Images)

A merger of Hapag-Lloyd and United Arab Shipping Company (UASC) has hit a snag, with the German shipping line and some banks seeking assurances that UASC's top shareholder Qatar remain committed to the deal for the long term, sources say.

Hapag Lloyd Chief Executive Rolf Habben Jansen told a news conference this week he had underestimated the complexity of the 7 billion to 8 billion euro ($7.6-$8.7 billion) deal, which will create one of the world's largest shipping lines.

Two finance sources, who declined to be identified citing deal sensitivity, said one of the main concerns of Hapag Lloyd and some of the Gulf-based syndicate banks is that Qatar could in future lower its stake in the combined group.

The worry is that rival container shippers could acquire a stake in the merged group if Qatar sells shares, one of the sources said.

The sources said Hapag Lloyd and banks had sought a commitment that there would not be a sale of shares by Qatar Investment Authority (QIA), one of the world's largest sovereign wealth funds.

Qatari officials declined to comment. UASC and Hapag Lloyd also declined to comment.

"What is being sought are assurances that there would be no change in the share ownership by QIA," one of the sources said.

The second source added: "Hapag for its own part wants to make sure that the financing of the deal does not fall apart at some time in the future."

Qatar holds a 51 percent stake in UASC, Saudi Arabia has 35 percent and the rest is owned by United Arab Emirates, Bahrain, Kuwait and Iraq.

Qatar will hold 14 percent in the merged group via QIA's subsidiary Qatar Holding LLC, while Saudi Arabia will have a 10 percent stake, UASC has said.

Hapag-Lloyd, which would gain access to bigger ships on the major Asia to Europe trade route through the merger, said this month it would postpone the completion date to May 31 from March 31, but the deal was not at risk.

It also said it had all merger clearances and regulatory approvals and all necessary banking approvals as have most banking approvals for Dubai-based UASC.

The sources said another factor slowing the deal is the proposed sale of shipping company United Arab Chemical Carriers (UACC), which is necessary under the terms of the merger.

UASC is the biggest shareholder in UACC, data from UASC's and UACC's websites show.

The finance sources said options being considered included putting UACC into an independent trust. Another option, if no buyer is found, is QIA acquiring the shares in UACC.

Hapag Lloyd's Habben Jansen told the news conference this week that the sale of UACC was part of the deal and was being dealt with, without providing further details.

UACC, which has a fleet of chemical and oil products tankers, was valued at over $150 million, according to ship industry sources.

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