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Temasek vies for Hapag-Lloyd and also gains a foothold in Fesco

2 December 2008
Temasek Holdings, the Singapore government investment fund, has acquired a small holding in Far Eastern Shipping Company, the Russian shipping and logistics group.

Temasek Holdings, the Singapore government investment fund, has acquired a small holding in Far Eastern Shipping Company, the Russian shipping and logistics group. This comes at the same time as Neptune Orient Lines (NOL), in which Temasek has a 66% stake, is attempting to gain control of Hapag-Lloyd, the German container shipping company.

A holding in the Russian firm would appear to fit well in Temasek’s portfolio.

Temasek acquired a 3.14% stake in Fesco on 3 September and thus became the fifth largest shareholder in the listed Russian company.

A takeover bid is not very likely as Industrial Investors Group (IIG), a Russian holding company, controls 53.81% of the Fesco stock. Evgeny Ambrosov, president of Fesco, noted: “For us the arrival of such long-term shareholders is a sign of support to Fesco development strategy and belief in the company’s strong potential.”

Meanwhile, a Reuters report dated 11 September said that NOL leads the race to acquire Hapag-Lloyd from TUI, the listed shipping and tour operating group, ahead of a group of Hamburg-based investors.

NOL would be able to pay significantly more than the Hamburg group thanks to possible synergies which the group of investors would not be able to realise.

Firming of the dollar against the euro also played into the hands of NOL to the tune of $300M.

Hapag-Lloyd predicted price

Analysts have predicted that Hapag-Lloyd could fetch €4-5Bn (up to $7.1Bn) in a sale, but with slower growth in freight rates on the horizon, such a price might not be feasible, the report said, adding that binding offers for Hapag-Lloyd are expected by the end of the month.

Hapag-Lloyd’s fleet has a combined capacity of about 500,000teu and that of NOL in the region of 400,000, which put together would make a combined group roughly equal in size with CMA CGM, the third largest operator in the world, figures from AXS Marine, the internet-based resource, show.

Fesco’s container shipping fleet, which comprises 28 rather small vessels, does not significantly increase Temasek’s footprint in the container shipping industry.

However, the company also operates container terminals in Vladivostok, St Petersburg and Novorossiysk, which fits in with Temasek’s picture: it is the sole owner of PSA International, a major container port operator.

In addition, NOL operates container logistics business and terminals under its APL brand. Meanwhile, Fesco operates a fleet of 15,000 railway wagons, including those which carry containers, which it employs on the Trans-Siberian Railway.

Temasek invests in industry sectors that correlate with the economic transformation of the country. It aims to tap the potential of competitively-positioned companies and seek to identify companies proving to be best-in-class, be it regionally or globally.

Temasek narrowly escaped being hit by the near collapse of Merrill Lynch, because it is the single largest investor in Merrill controlling about 14%. Now it stands to gain as much as $1.5Bn if a $50Bn offer for it from Bank of America is accepted.

Fesco has a strong foothold on the Russian Far East trades, where its 67 strong fleet - including container vessels, dry bulk carriers and icebreakers - operates in waters where ice usually hampers shipping for part of the year.

Its container shipping business accounts for some 60% of coastal and 40% of international trade volume in the Russian Far East.

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