Update | Cosco set to become third largest shipping operator after deal to acquire Orient Overseas
Acquisition would bring to a close the family dynasty of Hong Kong’s first chief executive, Tung Chee-hwa
Shares of China’s Cosco Shipping Holdings climbed on Monday after announcing a deal to buy rival Orient Overseas International Ltd (OOIL), a move that would see the state-owned shipping operator leapfrog from sixth to third place globally if approved.
Hong Kong-listed Cosco shares gained 5.4 per cent to close at HK$4.3 on Monday while OOIL recorded its biggest daily gain in eight years, up 20 per cent to close at HK$72.
The share gains came despite the requirement for regulatory approvals and consent from Cosco’s investors before any deal goes ahead.
Chinese shipping giant Cosco has offered OOIL HK$78.67 per share, a premium of 31 per cent over the latter’s closing price of HK$60.00 on its last trading date on Friday, according to documents filed by the companies with the Hong Kong and Shanghai stock exchanges on Sunday. Cosco said it would finance the deal with a bridge loan from Bank of China.
“The price is quite reasonable,” Xu Zunwu, general manager of Cosco Shipping Holdings, said in Hong Kong on Monday. “The deal will improve our operating efficiency and profitability.”
OOIL’s listing status and global headquarters’ functions and presence in Hong Kong will be maintained, but the HK$49.23 billion (US$6.3 billion) acquisition would bring the curtain down on a Hong Kong family dynasty. The deal would see the family of former Hong Kong Chief Executive Tung Chee-hwa relinquish control of the shipping and logistics firm they founded in 1969.
