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French shipper CMA offers to buy Temasek's NOL stake

French shipping company CMA CGM SA has offered to buy Temasek Holding's shares in Neptune Orient Lines for S$2.26 billion ($1.61 billion), the Singapore shipping firm said in a filing to the Singapore Exchange on Monday.

The world's third largest container shipping line is offering $1.30 a share or 6 per cent above NOL's last closing price on the Singapore exchange to acquire Temasek's 67 percent stake in an all-cash deal, NOL said in a filing to the exchange on Tuesday.

CMA's offer will value NOL at S$3.4 billion.

The merger between NOL and privately-held, family-owned CMA would be the biggest container shipping deal in years.

Temasek has accepted the offer.

The deal is a sign of further consolidation in the global shipping industry on the back of a collapse in freight rates as growth in China slows, reducing the country's appetite for commodities just as a backlog of large vessels come into service.

Key shipping indicator, the Baltic Dry Index (BDI), a measure of freight rates for shipping bulk cargoes such as iron ore, coal and grains is hovering near record lows.

"The acquisition will enable the offeror to cement its position among the global leaders in the container shipping industry…The combination of CMA CGM and the NOL Group will create a powerful and dynamic new entity; and the combined group's clients will have access to an enlarged and well balanced shipping coverage across the strategic trades of global commerce, and to an extended range of products and services," CMA said in a statement.

The deal will give CMA access to NOL's Asia-to-Americas routes.

NOL group president and chief executive, Ng Yat Chung, acknowledged the current protracted weakness in freight rates is a key driver of the deal.

Scale is required to succeed in the current climate and ensure sustainable growth, he said at a press conference.

"On a standalone basis, NOL would require significant capital investments to maintain competitiveness," added Ng.

CMA will establish its regional head office in Singapore after the merger and intends to commit more volumes through Singapore, the world's second busiest container shipping port after Shanghai, said CMA vice chairman Rodolphe Saade.

According to Reuters, CMA will make a mandatory cash offer for the remaining shares from minority shareholders that include BlackRock.

NOL will also be delisted from the SGX where a trading halt of its shares have been in place since Monday morning.

Saade said CMA may eventually consider a listing of the merged entity in Singapore.

The deal is subject to regulatory clearance from anti-trust authorities in the U.S., European Union and China.

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