France Shipping Giant Negotiating Purchase of Biggest SE Asia Shipper

The world’s shipping companies are looking for new ways to deal with the economic slowdown.

Over the weekend, Neptune Orient Line announced that it was talking to CMA CGM about a possible takeover. The successful merger of the two companies would be the largest deal done in the industry in several years.

Neptune Orient Line is currently owned by Temasek Holdings, which is funded by Singapore. It is Southeast Asia’s largest container shipper. CMA CGM is a French shipping company that is currently the third biggest container shipping company in the world.

The deal is the result of the slowdown in the container industry. Falling demand and a decline in prices have lowered earnings for most of the world’s shipping companies. Slowing growth in China has also reduced the country’s need for commodities and for shipping.

All this occurred as new ships were being sent into service.

Singapore Shipping Association’s president told CNBC that consolidation of shipping companies is becoming a trend. It is the only way for the companies to continue to grow despite the difficulty in the industry.

CMA CGM, a private company based in Marseilles, says that the consolidation would be a good thing for the company. It would ensure that CMA CGM remained a global force in the industry. It would also offer significant advantages to both groups.

The talks are scheduled to continue until 7 December.

Between now and then, CMA CGM will investigate NOL. It will also begin to negotiate and set the definitive terms of a possible agreement. But the talks may not result in a takeover.

Although the industry is suffering, there has not been a large amount of consolidation between companies. Like NOL, several companies care controlled by sovereign-wealth funds with deep pockets. Others, like CMA CGM, are controlled by families. Both have long term views and are willing to ride out the current downturn.

CMA CGM’s vision includes holding onto its market share in Asia as Chinese shipping giants threaten to merge. A potential takeover with an Asian shipper like NOL could do just that.

Khurram Aziz is a freelance writer based out of London, England.