German shipping giant Hapag-Lloyd has announced its intentions to purchase well-known Israeli shipping carrier ZIM in a huge $4.2 billion deal. The announcement made by Hapag-Lloyd was the most recent example of consolidation in shipping and ocean freight – a trend that started well before the Covid pandemic but has continued almost a decade later.
If the deal went through, it would further cement Hapag-Lloyd’s key role in global shipping. The company is currently the fifth-largest shipper by volume worldwide, and any deal would make the merged group an instant leading player on the global trade stage.
Specifics of the proposed deal
Willing to pay $4.2 billion in cash for ZIM, Hapag-Lloyd would instantly increase its global reach, building on the company’s 400-vessel fleet. ZIM’s strengths include its own worldwide reach of calling 300 ports globally in over 90 countries.
Any deal would see ZIM shareholders receive some special privileges. Reports say that the Israeli government would have a so-called “golden share” in the merged company, which would give Israel more service options related to the merger. Israeli finance company FIMI would handle direct business with calling ports in Israel, with a potential company named “New ZIM” for this purpose. It should be noted that the specifics are still being ironed out.
Pushback against the proposed deal
There was immediate and swift pushback against the proposed merger between Hapag-Lloyd and ZIM. In Israel, ZIM’s workforce went on strike starting this past Sunday. Labor issues around the deal are not yet resolved. Additionally, some Israeli officials expressed concerns about ceding control of the updated company to a foreign-owned business.
For its part, Hapag-Lloyd CEO Rolf Jansen says he understands the concerns of the ZIM workforce but views the deal as a net-positive for everyone. The shipping industry is already jittery about job losses with some signs of a slowing market, and any additional labor concerns are likely to trigger skepticism.
What needs to happen for deal approval and rollout
In order to finalize the deal, labor concerns obviously are top of mind. Some officials in Israel have called for government action to intervene and prevent any possible deal from being approved. If labor concerns are resolved, presumably a major hurdle will be cleared.
Additionally, regulators in both Germany and Israel could potentially review the deal on competitiveness and monopoly grounds, as the deal would consolidate two well-known shipping players.
And, once formally approved, the work of rolling out the merged corporate entity will likely be a months or yearslong process similar to other mergers. So, it will be imperative to pull off the deal before any major economic contraction or further industry disruption.
