By Joyce Koh Pooja Thakur Mahrotri (Bloomberg) France’s CMA CGM SA is in unique talks to purchase Singapore’s Neptune Orient Lines Ltd., as world delivery corporations grapple with methods to revive earnings amid a glut of latest vessels, shrinking demand and declining costs.

A deal would carry collectively the world’s third-largest container firm with Southeast Asia’s largest container shipper. CMA CGM has till Dec. 7 to finish a due diligence overview and negotiate the definitive agreements for the provide, Neptune Orient stated in a press release Saturday. The Singapore-based liner is 67 percent-owned by state funding firm Temasek Holdings Pte.

“Temasek has been looking for a buyer for a while now, so if somebody comes along with a price they and NOL are comfortable with, consolidation may be good,” stated Song Seng Wun, an economist at CIMB Private Banking in Singapore. “It’s a very tough environment in terms of global demand and shipping rates – they have been bleeding.”

Liners have idled about 5 % of the worldwide fleet, slashed prices, bought property and minimize staff in an try and stem years of losses as sluggish world progress and an over-supply of vessels eat into delivery charges, which fell to a document low within the week ended Nov. 19. Supply progress is predicted to outpace demand for dry-bulk and tanker markets in 2016 and corporations have been looking for methods to earn cash.

Losses, Debt

Neptune Orient, which helped cement Singapore’s standing as a worldwide commerce hub, attracted takeover curiosity after simplifying its construction this 12 months by shedding its $1.2 billion logistics unit. The firm, created in 1968, ran up $1.2 billion of cumulative losses within the earlier 4 years. Its web debt within the interval nearly doubled to greater than $4 billion.

The firm’s shares have risen 7.2 % previously two weeks after it disclosed separate talks with CMA CGM and Danish conglomerate A.P. Moeller-Maersk A/S on a doable sale. Singapore’s benchmark Straits Times Index misplaced 3.1 % over the interval.

Acquiring Neptune Orient would assist consolidate CMA CGM’s place within the world container market together with Maersk and Mediterranean Shipping Co. Neptune Orient’s APL container unit has a 2.7 % market share, whereas CMA CGM controls 8.9 % of the market, in line with information from trade guide Alphaliner. 

Among 40 friends, Neptune Orient was the world’s sixth-biggest transporter of U.S. exports between January and September final 12 months and had a market share of 5.3 %, in line with JOC Group Inc. information. Mediterranean Shipping Co. led with 13 %.

©2015 Bloomberg News

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