By Reuters 2016-04-21 05:00:03

German container shipping group Hapag-Lloyd is in talks to merge with rival United Arab Shipping Company (UASC), German monthly Manager Magazin reported on Thursday.

According to the report, which pushed up shares in Hapag-Lloyd by more than 10 percent to a two-month high, a combination of the two groups would create the world's fourth-largest container shipping group.

It said the new venture was likely to be headquartered in Hamburg and that UASC stood to expect to hold a share of around one third of the merged firm.

Hapag-Lloyd said it would issue a statement later on Thursday, while declining to provide further comment. UASC was not immediately available for comment.

The shipping industry is in a long-term downturn where greater entities can achieve better economies of scale, and sources said merger talks were not implausible in this environment.

Hapag-Lloyd already merged with Chilean peer Compania Sud Americana de Vapores (CSAV) in December 2014, allowing it to swing to profit last year.

Nonetheless, Klaus Michael Kuehne, Hapag-Lloyd's third-biggest shareholder with a 20 percent holding, recently said he believed the company was too small to thrive alone.

CSAV owns 31 percent of Hapag-Lloyd, and HGV, the city of Hamburg's investment holding company, has 21 percent. UASC is a state-owned firm controlled by Gulf Arab states, with Qatar controlling the majority stake.

Talks between Hapag-Lloyd and United Arab Shipping Company

21 Apr 2016

Forms of cooperation being discussed / No binding results yet

Hapag-Lloyd AG (HL) and United Arab Shipping Company SAG (UASC) are currently discussing forms of cooperation including a potential combination of their mutual container shipping operations. In case of a business combination, the parties are basing their discussions on a relative valuation of the two businesses at 72% (HL) and 28% (UASC), subject to a mutually satisfactory completion of the negotiations and the mutual due diligence exercise. To date, the discussions conducted between the two carriers have not resulted in any binding agreement and no assurance can be given that these discussions will lead to a definitive agreement.

About Hapag-Lloyd
With a fleet of 177 modern container ships, Hapag-Lloyd is one of the world’s leading liner shipping companies. The Company has around 9,500 employees at 366 sites in 118 countries. With the acquisition of CSAV’s container business in December 2014, the Hapag-Lloyd fleet offers a total transport capacity of almost one million standard containers (TEU) as well as a container capacity of 1.6 million TEU – including one of the largest and most modern fleets of reefer containers. A total of 121 liner services worldwide ensure fast, reliable connections between all the continents. Hapag-Lloyd is a founding member of the G6 Alliance, one of the largest shipping alliances in the world, and is one of the leading operators in the Transatlantic and Latin America trades.