Qatar crisis: UASC-Hapag merger thrown into uncertainty
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As logistics companies serving the Middle East Gulf region scramble to adjust to its rapidly changing political dynamics, German shipping line Hapag-Lloyd and Middle East shipping line UASC may find their merger paralysed by the escalating diplomatic dispute.
Saudi Arabia, the UAE, Bahrain, Egypt and Yemen on Monday severed diplomatic relations with Qatar and blocked flights and ocean voyages to the country from its airports and seaports. They were joined hours later by Libya and, surprisingly, Mauritius and the Maldives.
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The recently completed merger between Hapag-Lloyd and UASC could become messy though as UASC’s two main shareholders are Qatar Holding and Saudi’s Public Investment Fund (PIF), and both took a 14.4% and 10.1% stake in the combined Hapag-UASC company.
According to shipping analysts Alphaliner, this arrangement was essential to Hapag-Lloyd cauterising its ballooning debt.
“Qatar Holding and PIF agreed to backstop 50% of the planned US $400m cash capital increase through a rights issue in Hapag-Lloyd that was supposed to take place within six months of the closing of the merger,” says Alphaliner. “The remaining 50% of the capital increase was to be funded by CSAV and Kühne Maritime.”
“It is currently unclear how the Hapag-Lloyd shareholders will resolve the complications arising from the diplomatic spat involving Qatar and its erstwhile Middle Eastern partners in UASC,” Alphaliner added. Hapag-Lloyd’s total post-merger debt had now risen to over $8.3bn.
If Saudi Arabia continues to disallow KSA businesses from doing business with Qatar, the merger cannot go ahead, unless international investors step up to take on the commitments of the Qatari and Saudi Arabian investors.
ASC.com has reached out to Hapag-Lloyd and UASC for comment.