At a time when Chinese officials are calling for a more rational and sober approach to outbound M&A, a Chinese bank is backing COSCO, a Chinese state-owned shipping company, to acquire. Hong Kong logistics company for $6.3 billion.

Recently, shipping company COSCO Shipping Holdings Co. acquired logistics and container shipping services company Orient Overseas International Ltd. for $6.3 billion. In which, COSCO is a shipping group owned by the Chinese state and Orient Overseas is headquartered in Hong Kong. This deal made COSCO the largest shipping company in the Pacific, beating both rivals, A.P. Moller-Maersk of Denmark and CMA CGM of France.

In today’s trading session, shares of Orient Overseas rose 20% to HK$72 – the strongest in eight years. COSCO shares also rose 5.4%, after gaining 11% since Friday.

According to data from Alphaliner, the COSCO – Orient Overseas block after being merged can increase the carrying capacity to 77,208 containers on the Asia – North America route. In the context of the shipping industry, which is struggling with low freight rates and overload, orders to the US have become a decisive factor for the survival of shipping lines. Earlier this year, two shipping lines Maersk and Hyundai Merchant Marine Co. said it is trying to negotiate with customers to get higher rates on trans-Pacific routes.

At a time when Chinese officials are calling for a more rational and sober approach to offshore M&A, Dang Huangjun, COSCO’s CFO, said the company will receive a loan from China. demand from the Bank of China (BoC).

Compared to the average trading price of Orient Overseas shares in the 20 days before the deal was announced, COSCO’s asking price was 49% higher. This is the first time in 20 years that a logistics firm in Hong Kong has been acquired at such a high price. In 1997, Neptune Orient Lines bought APL for $833 million – 57% higher than the transaction price.

That shows Beijing’s great determination to make COSCO a major player in the port and shipping industry.

Corrine Png, director of Crucial Perspective Singapore, said: “This is a very meaningful deal for COSCO. Other companies need to be wary, although currently COSCO’s market share is only a few points compared to Maersk and MSC, in five years they could very well become a world leader.”

Not only will it increase COSCO’s market share and size (after the merger of COSCO – Orient Overseas will become the third largest shipping company in the world in terms of market capitalization), the acquisition of Orient Overseas will help COSCO improve operational efficiency. greatly increased thanks to the top-notch IT system and ship management of the Hong Kong company.

“COSCO will learn a lot from Orient Overseas because it’s a very well-run company,” said Mr. Png.

The deal between COSCO and Orient Overseas was also announced just over a week after Chinese President Xi Jinping visited Hong Kong on the 20th anniversary of the city’s return to China.

Observers worry that after this expensive “handshake”, Hong Kong will also have to bear an equally expensive price when its role as a financial center and gateway to the mainland will fade in the context of the Chinese state-owned companies are increasingly expanding into Hong Kong and a number of hubs are emerging on the mainland such as Shenzhen, Guangzhou and Shanghai.

Closing the deal will put an end to the illustrious history of a family shipping business in Hong Kong. Established in 1947 by Mr. C. Y. Tung, Orient Overseas has become the first Asian carrier to transport goods across the Pacific region and changed the face of global trade in the entire Asia-Pacific region. Binh Duong.

An inside source said Mr. Tung’s family had realized that they could no longer compete with other carriers due to overcrowding and price collusion even though rates had begun to recover since 2015. last. “The company is in an unsustainable situation and the deal is offered at a fair price,” the person said.