UAE, German firms in talks to create 4th biggest shipping group

German container shipping group Hapag-Lloyd is in talks to merge with United Arab Shipping Company (UASC) in what would be the latest tie-up in an industry hammered by overcapacity and a faltering global economy.

Hapag-Lloyd said on Thursday the talks were based on giving its shareholders 72 per cent of the combined business and UASC's shareholders the rest, but it gave no further details and said there was no certainty of a deal.

Dubai-based UASC was not immediately available to comment.

Germany's Manager Magazin said earlier a deal would create the world's fourth-biggest container shipping group.

France's CMA CGM is in the midst of buying Singapore's Neptune Orient Lines to cement its position as number three behind Switzerland's MSC and Denmark's Maersk, the industry leader.

At 1210 GMT, Hapag-Lloyd shares were up 10.7 per cent at 18.1 euros, after earlier touching a three month high of 18.9 euros.

Hapag-Lloyd currently focuses on transatlantic and Latin America trading. A link-up with UASC would add a strong position in the Middle East, including a nascent business with Iran that UASC resumed earlier this year.

It would also add ships with a capacity of 18,000 containers, which analysts say the German firm needs as transport from Europe to Asia increases.

Hapag-Lloyd merged with Chile's Compania Sud Americana de Vapores (CSAV) in December 2014, helping it to swing to profit last year.

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

CSAV owns 31 per cent of Hapag-Lloyd, and HGV, the city of Hamburg's investment holding company, has 21 per cent.

UASC is controlled by Gulf Arab states, with Qatar holding the majority stake.

So far, Hapag-Lloyd's recipe for battling the industry crisis has been to target niche business opportunities, such chemical or radioactive cargoes that offer higher margins. Its fleet of 177 vessels includes reefer containers for the purpose.

Manager Magazin said a tie up between Hapag-Lloyd and UASC was likely to be headquartered in Hamburg.

Other recent deals in the industry have included a merger between state-controlled Chinese shippers Cosco and China Shipping.