* Tie-up would create world's fourth-largest shipping player
* Companies are Germany's largest shipping groups
* Deal may be signed as early as end of first quarter-source
(Recasts lead, adds details, background)
FRANKFURT, Dec 18 Germany's largest container
shipping companies, loss makers Hapag-Lloyd and
Hamburg-Sued, are exploring a merger to create a global player
better able to survive the sector's four-year slump.
A combined operator would rank as the world's fourth-largest
after Maersk, Mediterranean Shipping Company and
CMA CGM with annual revenue over 10 billion euros ($13
billion), a fleet of about 250 vessels and 11,500 staff.
"This is a business where size matters. Hamburg-Sued would,
in the long-term, run into difficulties in keeping up with the
big industry players," said Westend Brokers Research analyst
"It's a good step, potentially giving Germany one global
The companies, which tried and failed to join forces 16
years ago, said in a joint statement on Tuesday they were
investigating whether and under what conditions a merger would
be of interest.
Container shipping groups have been struggling through the
worst slump on record, caused by a weak global economy,
oversupply of vessels and low freight rates.
German ship owners earlier this year even called for a state
bailout. The country is home to the biggest fleet of container
ships, accounting for 1,800 of the 5,000 vessels worldwide.
According to a source close to Hapag-Lloyd, the talks, which
started this summer, should be brought to an end by the close of
the first quarter of 2013.
SEEKING A PARTNER
Major Hapag-Lloyd shareholder Klaus-Michael Kuehne has long
sought a combination of the group with a strong peer, arguing it
made sense to bolt Hapag's Asia focus to Hamburg-Sued's strength
on South American routes.
"The larger shipper would be among the winners in the
industry," Kuehne was quoted as saying in an advance copy of
Wednesday's edition of Die Welt newspaper.
Kuehne, who controls Swiss logistics group Kuehne & Nagel
and owns around 28 percent of Hapag-Lloyd, said it
would be even better if the two merged with a third shipper from
Five years ago, an attempt was made to merge Neptune Orient
Lines from Singapore with Hapag-Lloyd but the deal failed after
wrangling over who would own the majority stake.
A merger with Hamburg-Sued would also allow Hapag-Lloyd to
reduce its debt and give it breathing room until the sector
resurges, the source said.
At the end of the third quarter, Hapag's net debt was 1.8
billion euros, up 542 million over the year-earlier figure. The
group posted revenues of 5.2 billion and a net loss of 94
million in the first nine months of the year.
Hamburg-Sued, owned by the wealthy Oetker family - a
household brand name associated with baking powder and frozen
pizzas - is debt free, but is also losing money according to
German media reports.
No banks have been mandated so far, though Hapag-Lloyd and
Hamburg-Sued will pick accountants and lawyers shortly and start
conducting due diligence, the source added.
The city of Hamburg holds close to 37 percent of
Hapag-Lloyd, while German travel and tourism group TUI AG
also holds a 22-percent stake.
Hamburg-Sued, which was founded in 1871, had sales of 4.75
billion euros in 2011. It declined to comment beyond the joint
($1 = 0.7598 euros)
(Reporting by Arno Schuetze, Christoph Steitz, Jan Schwartz and
Maria Sheahan; Editing by Hans-Juergen Peters and David Cowell)