Chinese shipping giant Cosco (HKG:1919) has announced its intention to buy its Hong Kong rival Orient Overseas International Ltd, in a deal worth $6.3 billion.
OOIL has accepted the offer, but it remains subject to regulatory approval. Should the deal go through, Cosco will become the world’s third biggest shipping company with more than 400 vessels.
“COSCO Shipping Holdings believes this acquisition will enable both COSCO Shipping Lines and OOIL to realize synergies, enhance profitability and achieve sustainable growth in the long term,” Cosco said in the statement.
Cosco is offering $10.07 per share, a 38 percent premium on OOIL’s closing price on Friday. Cosco is currently trading up 5.41 percent on the news of the deal, with OOIL (HKG:0316) shares up by 20 percent (1325GMT).
OOIL is currently the world’s seventh largest shipping company, with a wave of recent mergers in the industry leaving the top six shipping companies controlling 63 percent of the market. According to transport research firm Crucial Perspective, the world’s two largest shipping companies are Denmark’s Maersk Line MAERSKb.Co and Switzerland’s Mediterranean Shipping Company.
OOIL was founded by the family of Hong Kong’s first Chief Executive Tung Chee-hwa, who retain a 69 percent stake in the company. They have accepted the offer, but the takeover remains subject to the approval of Cosco shareholders, and US and Chinese regulators.