German container shipping giant Hapag-Lloyd announced Monday it is teaming up with United Arab Shipping Company to become one of the world's top five shipping companies as consolidation in the sector continues apace. "Hapag-Lloyd AG and United Arab Shipping Company (UASC) have signed a Business Combination Agreement to merge both companies, subject to the necessary regulatory and contractual approvals," the firm said in a statement. The combined companies would become the world's fifth-largest container firm with an annual turnover of around $12 billion (10.8 billion euros). No financial details were disclosed. "This strategic merger makes a lot of sense for both carriers – as we are able to combine UASC's emerging global presence and young and highly efficient fleet with Hapag-Lloyd's broad, diversified market coverage and strong customer base," said the German firm's chief executive Habben Jansen. Once UASC's ships are integrated into the fleet, Hapag-Lloyd will have 237 ships afloat with a total capacity of 1.6 million TEU (twenty-foot equivalent units, which is the standard measure of a container), expected to transport around 10 million TEU to destinations around the world each year. The combined firm will remain listed on the German stock exchange and retain Hapag-Lloyd's headquarters in the northern port city Hamburg. UASC's majority shareholders, Qatar Holding LLC and the Public Investment Fund of Saudi Arabia, will take stakes of 14 percent and 10 percent in the merged company. All of UASC's shareholders unanimously approved the deal at an extraordinary general meeting. Hapag-Lloyd's shareholders are scheduled to vote on the merger at their annual meeting in August. CSAV, the city of Hamburg and Kuehne Maritime will remain the largest shareholders in Hapag-Lloyd. The merger is expected to be completed by the end of 2016. Hapag-Lloyd comes to the UASC deal off the back of a successful purchase of Chilean firm CSAV's container shipping arm and its own stock market flotation, both in 2015. With global demand for logistics services slipping, firms active in the sector have found themselves with too much capacity on their hands. That has made for an environment friendly to mergers – including Hapag-Lloyd's own takeover of CSAV's shipping arm in exchange for a 30 percent stake in the merged company. Hapag-Lloyd also recently inked an alliance deal with five Asian maritime shipping groups that will come in to force in early 2017. Together representing 18 percent of the global container fleet, the alliance hopes to lure clients as a one-stop shop for a wider range of services and destinations. Shares in Hapag-Lloyd were showing a loss of 8.4 percent at 17.20 euros on the Frankfurt stock exchange in late morning trade on Monday.
