Shipping firm CMACGM has announced that it wanted to raise $2 billion (1.5 billion pounds) to help finance its takeover of CEVA Logistics, with half the funds coming from selling the port property to its joint venture with China Merchants Port Holdings Co.
CMACGM, the fourth largest container shipping company in the world, headquartered in France, bought CEVA this year to invest in land logistics, valuing the company at about $1.7 billion.
CMACGM said it pushed back some of CEVA's financial goals in Switzerland by two or three years, partly due to a slowdown in some industries, such as automobile manufacturing.
Under a contract to help finance the CEVA agreement with China Merchants.
The Terminal Link deal, expected to be finalized in the spring, would be partially funded by the joint venture's $468 million capital increase and a China Merchants loan that would be transformed into another asset's increase after eight years, CMACGM said in a statement of quarterly results.
Terminal Link's ownership, in which CMACGM holds a 51% shareholding and China Merchants has 49%, CMACGM Chief Financial Officer Michel Sirat told reporters, would not change. CMACGM also plans to increase $860 million from the sale and leaseback of certain ships, $93 million from the sale of a logistics platform in India and an additional $100 million from a customer receivable securitisation program.
The shipping company said it was pushing back CEVA's loss-making sales targets, partially due to extreme circumstances in some sectors such as car making.
Medium-term financial objectives, including an aim to increase $400 million in core earnings or earnings before interest, tax, depreciation and amortization (EBITDA) were now supposed to be achieved in 2023 or 2024 and not in 2021, the company said. The short-term goal of making CEVA a positive revenue by the end of the year was pushed back to 2020, Sirat said.
Sirat clarified that due to their trade war, CMACGM was seeing a decline in production between China and the United States, and this was compensated by stable trade on other roads.
CMACGM anticipated slightly improved market trends next year as a ship upgrade to comply with more rigorous fuel pollution standards would minimize supply and boost freight prices, the CFO said.
Like its peers, CMACGM is planning to pass on the cost of the new laws to customers to reduce the sulfur content in shipping fuel, and Sirat said the group was expecting this to be around $150-$200 per container on average.
Tags : CMACGM, CEVA agreement, China Merchants, finance, largest container shipping company,