Bottom Line: Denmark-based Maersk Group’s APM Terminals owns more than 25% of Global Ports Investments (GPI), with Russian partners, and GPI is hoping to acquire the National Container Company (NCC), giving the group control over the majority of Russian container shipping in the Black Sea, the Baltic Sea, the Gulf of Finland and the Arctic.
Analysis: The deal still has to br approved by competition authorities in Russia, Ukraine and Cyprus as well as by the Russian Control Commission. If it is approved, in all likelihood Maersk’s APM Terminals will emerge as majority shareholder because the Russian partners in this venture may not be able to come up with the capital. What Maersk’s APM will be gaining, quite simply, is near monopoly control over this container shipping market—even if the business is slowing and if the deal means taking on heavy debt. (GPI’s 2012 revenues were $501.8 million, but costs were up 24% at $343.2 million compared to the previous year, with operating profit down 30% to $157.3 million. Earnings gained 2% to $287.9 million, but after-tax profit took a 16% dive to $123.5 million.)
If the deal is approved, APM will have a 30.75% stake, after the NCC shareholders receive 18% in the deal. GPI’s three Russian partners (the company’s founders) will have 30.75% between then, and 20.5% will be spread among shareholders in London and Moscow.
Recommendation: We should know one way or the other within the next month or so. But there is plenty of oligarch politics that could get in the way. For one, the owner of Universal Cargo Logistics Holding (UCLH), Vladimir Lisin, will fight to keep this deal from being approved because it will directly challenge his company’s rival in this sector, the Mediterranean Shipping Company and the related Terminal Investment Ltd. (TIL) unit. The deal would also threaten Ziyavudin Magomedov container business at the Novorossiysk port. It will all depend in which way the winds of political (Putin) favoritism are blowing.