Dive Brief:
- Hapag-Lloyd and UASC postponed the closing deadline for their agreement from March 31 to May 31 as "final preparations for the closing take more time than expected," per a Hapag-Lloyd press release.
- The company stated all clearances and bank approvals were completed on Hapag-Lloyd's side, and UASC had obtained "substantially all" banking approvals, but delays have been attributed to financing issues related to the economic downturn in the shipping sector.
- The merger may not be finalized by the end of March, but should be completed soon after, according to Hapag-Lloyd. The postponement does not affect the April 1, 2017 start date for THE Alliance.
Dive Insight:
It is not the first time Hapag-Lloyd and UASC have promised to conclude their merger within a few weeks, only to delay it further. Last time, the two companies had expected to close the deal by November 2016, only to run into trouble securing bank financing to fulfill contractual obligations, which forced their projected completion out to March 31, 2017.
The two shipping lines had hoped to consolidate operations by April 1, upon the launch of THE Alliance, but reports indicate the state of the shipping industry have made banks less willing to provide necessary loans. Hapag-Lloyd's statement it had fulfilled its own obligations but was waiting on UASC to move from "substantially all" banking approvals to fully approved appears to confirm these reports.
In either case, the two lines will continue to operate independently until all documents are put in place. While Hapag-Lloyd has promised the first few weeks of April, previous experience states it may delay further. Meanwhile, THE Alliance and Hapag-Lloyd will have to navigate its service arrangements without UASC's 2.5% market share.
