State-Owned Shipping Giant Drops Consolidation Plans
By Bao Zhiming and Wang Xintong
China Merchants Group Ltd. (CMG) has abandoned plans to consolidate its container shipping operations, a move one analyst attributed to unexpectedly strong first-quarter earnings from the business.
Two listed subsidiaries of CMG — China Merchants Energy Shipping Co. Ltd. (CMES) (601872.SH -0.33%) and Antong Holdings Co. Ltd. (600179.SH 0.00%) — announced that the plans had been dropped in separate stock exchange filings Wednesday. The companies attributed the termination to changes in market conditions and the target companies’ situations, as well as a failure to agree on transaction terms.
But an analyst at a brokerage told Caixin the primary reason was likely the strong performance of the container shipping sector in the first quarter, which far exceeded expectations. In particular, Antong’s robust earnings rendered the original valuation framework obsolete.
While CMES’ overall profit fell 37.1% to 865 million yuan ($120 million), its container shipping segment saw its net profit more than triple to 335 million yuan. Antong’s profit jumped 371.5% to 241 million yuan, which the company largely attributed to operational improvements and rising freight rates. If one-time gains are excluded, the increase reached 925.79%.
The results mirror a broader industry rebound. Global container shipping net profit hit $9.9 billion in the first quarter, up 82.8% year-on-year, according to shipping analyst John McCown.
According to a plan unveiled in June last year, Antong would have issued shares to CMES to buy its 100% stake in a container liner and 70% stake in a company that specializes in shipping wheeled cargo, such as trucks.
A brokerage analyst previously said the deal could help domestically-focused Antong tap into global markets and boost revenue.
However, some CMES investors had opposed the deal, arguing that the container liner — Sinotrans, which focuses on short-distance international routes — had strong growth potential.
After the termination, CMES shares rose for two straight days, closing at 6.13 yuan Thursday, while Antong’s stock fell 8.4% Wednesday before rebounding 1.83% the next day.
Contact reporter Wang Xintong (xintongwang@caixin.com) and editor Joshua Dummer (joshuadummer@caixin.com)
English-language online news portal of Chinese financial and business news media group Caixin. Global Neighbours is authorized to reprint this article.
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