Cosco share trading halt triggers takeover talk

5/23/2017

Cosco Shipping Holdings, the containership and port arm of China Cosco Shipping Group, has announced a trading halt for its shares listed on the Shanghai Stock Exchange, as the parent conglomerate is planning a major event that might involve the listed unit.

In an exchange filing, Shanghai- and Hong Kong-listed CSH said it was now in touch with the parent group about the event and would reveal more details within five working days.

Its shares in Hong Kong, however, continued to trade “as there is no inside information that needs to be disclosed” pursuant to the disclosure rules of the Hong Kong Exchange, CSH said in a separate filing.

Nevertheless, the suspension, which was announced late on Tuesday night, sparked industry speculation that the event might be related to major container shipping-related acquisition deals.

Talks about Cosco Shipping buying Orient Overseas Container Line resurfaced in the Chinese shipping community, with some market sources pointing to the recent climb in share prices of OOCL’s parent — Orient Overseas (International) Limited — in Hong Kong.

OOIL’s share closed at HK$44 on Tuesday, a 11% increase compared to that of May 5, when the share price started its uptrend.  

Some, however, expect an internal asset restructuring to be more likely.  

One view is that Cosco Shipping may put its logistics arm, Cosco Shipping Logistics, back on the exchange.

CSL, following the Cosco-China Shipping merger, was established largely on the foundation of Cosco Logistics, which was sold to Cosco Group in 2013 by China Cosco Holdings — CSH’s pre-merger predecessor — to help the listed unit regain profitability and avoid delisting from the Shanghai bourse at that time.

With CSH’s robust bottom line in the first quarter and Cosco Shipping’s ambition to develop door-to-door services, the return of the logistics arm could be seen as a logical move, some sources said.

There was also talk that the state-owned giant could even consider injecting its shipyard assets into CSH.

Moreover, the likelihood of a major port acquisition has drawn a great deal of attention, as Beijing just concluded its Belt and Road Summit that saw numerous deals signed for infrastructure projects.

Cosco Shipping, together with Lianyungang Port Group, bought a combined 49% stake in the dry port of Kazakhstan’s Khorgos-East Gate Special Economic Zone on Monday, in a bid to develop China-Europe rail freight networks.

One bet was that Cosco Shipping could transfer its 24.5% stake into the listed unit.