NOL Appears As Front-Runner In Bid For Hapag-Lloyd

SINGAPORE 's container shipping line Neptune Orient Lines (NOL) is seeking USD5-7 billion in loans to land a winning bid for German carrier Hapag-Lloyd, according to banking sources, Reuters reports.

The merger of the two companies could potentially create the world's third largest container shipping group, after AP Moller-Maersk and Mediterranean Shipping Co (MSC).

The report coincides with an Asian tour by Michael Frenzel, the CEO of Hapag-Lloyd's holding company and tourism group TUI, which is looking for buyers for the group's container shipping line. Analysts maintain the carrier is worth $7 billion, including debt.

NOL has a market value of $3.5 billion and several analysts have said any merger will require the financial support of its major shareholder, Singapore sovereign wealth fund Temasek Holdings.

"NOL is a potential bidder for Hapag-Lloyd," Jochen Rothenbacher, an analyst at German brokerage Equinet, was cited as saying in the Reuters report. "It should be seen positive for TUI that NOL is in talks to take up $5-$7billion."

It added that a spokesman for NOL is refusing to comment on the report, however, NOL chief executive Thomas Held said back in April that his company was eyeing a merger with Hapag-Lloyd as a possible growth option.

NOL is said to be in talks with Singapore 's three local banks--DBS Group, Oversea-Chinese Banking Corp and United Overseas Bank--as well as with foreign banks for the loan, including HSBC, Citigroup and Royal Bank of Scotland , according to three bankers close to the deal, Reuters said.

It noted that the loan would be a significant undertaking for NOL, which it said had $636 million in debt by early April and a low gearing ratio of 0.23 times, which measures how much a firm's activities are funded by equity versus debt.

Mr Frenzel is also expected to meet in Hong Kong with representatives from Orient Overseas (OOCL) and NYK Line in Tokyo among other potential bidders such as Cosco, CSCL, Hyundai Merchant Marine and STX Pan Ocean .