Wilh Wilhelmsen and Wallenius Lines have brought their long-standing partnership to a new level as they revealed plans to create a new joint venture.
The two car carrier owners have signed a letter of intent to merge their ownership in the jointly controlled Wallenius Wilhelmsen Logistics, EUKOR Car Carriers and American Roll-on Roll-off Carrier.
From this transaction, a new entity Wallenius Wilhelmsen Logistics will be formed, in which Wilh Wilhelmsen and Wallenius Lines plan to hold a 40% stake each.
Jan Eyvin Wang, president of Wilh Wilhelmsen, said: "The markets in which the jointly owned entities operate are going through rapid change and require a more agile and efficient business model.
"In addition to establishing one common owner and governance structure, the proposed merger is expected to enable synergies between $50m-$100m by combining the assets and harvesting economies of scale."
Executives from Wilh Wilhelmsen and Wallenius Lines explain to TradeWinds that the three operating companies which will be merged operate a fleet of 134 vessels.
The total turnover of the combined entities will be $4bn, with 6,000 employees based in 50 different countries.
Other companies, including Hyundai Motor Company and KIA, are stakeholders in the joint subsidiaries of Wilh Wilhelmsen and Wallenius Lines.
HMC and KIA have a 10% stake each in EUKOR, but the executives said this would not be affected.
Thomas Wilhelmsen, chair of Wilh Wilhelmsen, and Diderik Schnitler, chair of Wilh Wilhelmsen Holding, said in a joint statement: “Changing market dynamics and pressure on margins enforce a fundamental change in how we manage our joint ventures, especially within the shipping segment.
“Together with our Swedish-based partner, we wish to continue to be a world leading player within the car and ro-ro segments and grow our logistics footprint to serve our customers.”
New shares to be issued
As part of the deal, Wilh Wilhelmsen will issue new shares to Wallenius Lines when merging the ownerships.
But the final terms and ownership levels will be confirmed with the announcement of the final agreement by the end of 2016.
The new company will keep the existing listing of Wilh Wilhelmsen on the Oslo Stock Exchange.
Craig Jasienski, current chief executive of EUKOR, will become the chief executive of Wallenius Wilhelmsen Logistics.
In order to facilitate the transition process, Jasienski takes, as of today, on a dual chief executive role for Wallenius Wilhelmsen Logistics and EUKOR.
"Today we face a fragmented and volatile market, requiring more complex and costly operations, combined with downward pressure on prices.
"With this new proposed structure we can realise significant operational and commercial synergies, creating an efficient and agile platform for future growth."
The board of the new company will have seven to nine elected members, of which the majority owners will have two each.
Hakan Larsson, who now chairs the steering committee for the jointly owned entities, will be proposed as chair of the board, the companies said.
The proposed transaction is expected to close within the first quarter of next year while the final agreement will include a right of first refusal if either of the parties sell below 20%.
Sale of Glovis stake ahead?
Pareto Securities said it was "positively surprised" by the move while it expects to upgrade both its recommendation and price target.
Analysts Eirik Haavaldsen and Oystein Dalby said in a report that improved transparency following the deal should support a revaluation of the stock.
Shares in Wilh Wilhelmsen surged by almost 15% on the Oslo Stock Exchange following the announcement this morning.
But the analysts also noted that Wilhelmsen is once again demonstrating it is willing to loosen up on its company control.
It has already spun-off its stake in peer Hyundai Glovis as it created a new Oslo-listed holding company Treasure.
Haavaldsen and Dalby said: "Now controlling a significantly smaller part of the listed entity could possibly mean that the Glovis stake is less important.
"Why should not Wallenius also contribute to this control?
"In other words, a sale of Glovis shares by Treasure could be on the table at some point."
