As a wave of mergers and acquisitions in the maritime shipping business gets under way, the Israel Corporation is lobbying the government to give up its so-called golden share in Zim Integrated Shipping Services so that Zim can play in the buying and selling.
The 18th-biggest company in the sea cargo industry, Zim would benefit from bulking up through M&A deals to make it a bigger and more cost-efficient player.
A golden share entitles the holder, usually a government, to outvote all other shares in certain circumstances. It’s a tool designed to ensure assets regarded as vital to national security. But the government’s golden share, which dates to the time when Zim was a state-owned company, will make it impossible for the company to raise capital and expand its fleet, said CEO Rafi Daniel.
Germany’s Hapag-Lloyd announced plans yesterday to buy the assets of Chile’s Compañía Sudamericana de Vapores to create the industry’s fourth-biggest competitor. The combined company will operate 200 vessels with a capacity of 7.5 million 20-foot equivalent units, or TEUs, and annual sales of 9 billion euros. ($12.5 billion).
The Hapag-Lloyd-CSAV merger comes three weeks after the sector’s three biggest companies by capacity – Denmark’s A.P. Moeller-Maersk, France’s CMA-CGM and Swiss-based Mediterranean Shipping Company – obtained U.S. approval for an alliance that would encompass 252 ships with a combined 2.6 million TEUs, or 15% of world capacity. Known as P3, the agreement will enable them to better manage supply and stabilize freight rates.
The agreement still needs regulatory approvals but it expected to be finalized sometime this quarter.
“This is proof why the golden shares need to be done away with,” Daniel said.
“The merger is a perfect example of the process of the process underway in the industry. The attempts by workers to stop the golden shares from being eliminated will only bring Zim to collapse. If the workers think ZIm only needs another infusion of cash and everything can go on as it was, then they are reading the competitive, legal and business map wrong,” he said.
He sharply criticized the Zim workers’ committee that sees the golden share as a defense against layoffs.
An oversupply of cargo vessels has coincided with slowing demand to create a prolonged slump in container shipping. The global financial crisis that set in six years ago slowed trade and led to the steepest decline in cargo rates since containerization became global in the 1970s.
To compete in the markets and make itself an attractive merger partner, fleet operators like Zim must offer customers the biggest vessels, which can operate with less energy and at lower costs. Zim counts only eight of these vessels, with 8,000 TEUs of capacity or more, and even those are going to shift the ownership of the banks that supplied the loans for buying them.