From Bloomberg Gadfly, Sept. 27:
So, Maersk might step in and buy some Hanjin assets after the South
Korean shipping company's bankruptcy filing, according to a Bloomberg
News report (citing analysts).
While it's understandable that the Danish giant's new boss Soren
Skou feels pressure to deliver growth and head off competition, he
must remain disciplined and avoid throwing good money after bad. In
principle, Hanjin's bankruptcy is positive for the rest of the container
shipping industry, which is beset by oversupply and chronically low freight rates.
But
it won't be enough to put shipping back on an even keel: Hanjin
accounts for less than 3 percent of global capacity and everybody
else has plenty of new ships on order. When announcing a split
of its transportation and energy activities last week, Maersk promised
to refrain from ordering more new vessels, which is a big relief. But
Skou says he will pursue acquisitions to try to expand market share as
shipping consolidates.
With an $11.5 billion liquidity reserve,
Maersk is better placed to pursue opportunistic purchases than some
over-leveraged rivals. Maersk's cash probably isn't earning much of a
return right now, so the bar for returns on investment is
presumably pretty low. Boosting its position in Trans-Pacific trade may
make sense too, as it's underrepresented there and scale's important in
shipping.
Yet despite all this, it's hard to see how buying more
shipping assets will solve Maersk's growth and profitability problems.
Customers are a fickle bunch and after Hanjin's demise, most will
already have made other arrangements to transport their goods (indeed,
Maersk says it's a beneficiary).
And history offers a sobering lesson here. After Maersk's
last big shipping acquisition -- the $2.6 billion purchase of P&O
Nedloyd in 2005 -- about half the acquired market share later vanished,
according to Drewry Martime Advisors' estimate....MORE
