NOL Shares Slide after CEO's Surprise Departure

Shares in Neptune Orient Lines fell more than 3 percent after the surprise resignation of its chief executive and as the Singapore shipping group prepares for a possible 5 billion euro ($7.9 billion) bid for German shipping giant Hapag-Lloyd.

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AP

Thomas Held, a German who led the state-controlled company for just 20 months, would have been a key player in leading NOL in talks with Germany's TUI, which is trying to sell the world's fifth-biggest container shipping firm Hapag-Lloyd.

"The resignation is very surprising, particularly given NOL's strong operating performance and potential bid for Hapag-Lloyd," UBS analyst Alex Chang said in a note to clients.

The news, announced after the close of trade on Monday, knocked NOL shares down as much as 3.2 percent. The broader Singapore market was 1.3 percent lower. NOL stock had ended the previous session up 5.3 percent on the back of a favourable broker note.

Most analysts noted that the appointment of Ronald Widdows, a 28-year veteran of APL, NOL's container business, was a strong sign that the group wants to continue to focus on container shipping despite an excursion into the logistics business in recent years.

Raising Billions

"We believe his experience would be valuable given our expectations that NOL will bid for Hapag-Lloyd," said UBS's Chang. "We believe he would be ideally placed to evaluate the risk and rewards of a potential acquisition."

Held had joined NOL, the world's seventh-biggest container shipping firm, as CEO in November 2006 from German logistics firm Schenker, which is owned by national railway group Deutsche Bahn.

A possible merger between NOL, 66-percent owned by Singapore's sovereign fund Temasek, and Hapag-Lloyd would create the world's No. 3 container shipping group, behind Denmark's A.P. Moller-Maersk and privately owned Mediterranean Shipping Co.

Banking sources told Reuters last month that NOL is looking to raise $5-$7 billion in loans for a likely bid for Hapag-Lloyd.

The loan plan came amid TUI Chief Executive Michael Frenzel's Asian tour last month to market the Hapag-Lloyd business, which analysts say could be worth up to $7.9 billion -- more than twice the $3.4 billion market value of NOL.

The size of a possible deal, potential difficulties in integration, and an expected weakening of freight rate as global trade slows amid a global economic slowdown would make the acquisition a huge undertaking for NOL.

The purchase would also face tough resistance in Germany, where media reports have quoted officials as saying the German government supports keeping Hapag-Lloyd in German hands.

"We think NOL is better off not to acquire Hapag-Lloyd considering the hostility towards foreign ownership within Hapag-Lloyd and the potential high price that an acquirer may be required to pay," Johnson Man Leung, an analyst at JPMorgan.