TUI to probably split Hapag-Lloyd cruising completely from freight under new RCI jv

**Ally** · 03-18-2008, 01:56 PM

Quote:

FOLLOWING Tui management’s decision to separate the container shipping business in a U-turn on its previous strategy, the sale of Hapag-Lloyd seems to be the most likely option at the moment.

Though chief executive Michael Frenzel reiterated that three possible options will be examined – spin-off, merger with another shipping company or sale – he said that the latter was probably the most speedy solution.

"It is in our interest to complete the process before the end of the year, but we are not selling under duress," Mr Frenzel said.

A spin-off would be the most lengthy and complicated solution, while a merger could only be an interim solution, as Tui would then be shareholder in a bigger shipping company. "There are pros and cons for each alternative."

Mr Frenzel would not admit that the group had given in to pressure from leading shareholders, John Fredriksen in particular, who publicly called for a separation of the Tui activities tourism and shipping.

He said that the management had pro-actively looked for a solution. "Strategy is what is feasible," Mr Frenzel said, downplaying his actual defeat. "You cannot rule a company against the will of the market in the long run." And it was the will of the majority of shareholders that Tui concentrate on tourism.

Tui cancelled a planned part-flotation of Hapag-Lloyd in 2004. Two years later, the shareholders’ call for a separation became louder. In contrast to the situation in 2006, shipping and tourism are now in a more stable situation, the chief executive said.

The first step in the separation business will be the relocation of necessary assets to Hapag-Lloyd in order to allow it to become an independent company. "We will have to get the ships to Hapag-Lloyd," Mr Frenzel explained.

The planned split does not include the Hapag-Lloyd cruise business, which will come under the Tui umbrella. Mr Frenzel indicated that the name might be retained. "We have to be careful not to destroy valuable brands."

"I am certain there will be strategic interested parties for Hapag-Lloyd," the Tui chief executive said. With regard to the rumours on NOL being interested in buying the Hamburg company, Mr Frenzel said that "talks and considerations, but no negotiations" were taking place at the moment.

"We are open." He would not comment on the Hamburg group investor that has already stepped forward with its intention to negotiate an acquisition of Hapag-Lloyd.

Commenting on the uncertainty that the planned separation of Hapag-Lloyd, and the potential sale to a foreign buyer, has already caused in the Hamburg maritime community and the company’s workforce, he said that Tui was first and foremost obliged to generate maximum value for its shareholders.

Analyst Hans-Peter Kuhlmann of public law bank LBBW does not regard the sale to a foreign company as likely. "Opposition from politicians and staff would be too strong."

Representatives of the Tui and Hapag-Lloyd workforce in the Tui supervisory board have already voiced their opposition to the plans and expressed their preference for a regional solution with Hamburg investors. "Those investors are interested in preserving Hapag-Lloyd as an independent company with its Hamburg headquarters", Tui supervisory board vice-chairman Jan Kahmann said.

The decisive point in any sale is the price, Mr Kuhlmann said. "It has to be above E4bn."

Lloyd's List - News