Doubts have been raised about whether COSCO will be able to complete its purchase of Orient Overseas (International) Ltd (OOIL) in time to meet its 30 June 2018 deadline as the deal still needs to be cleared by China and the US.
The proposed takeover is subject to five preconditions – of which four have been met but one is still outstanding, according to the container industry data specialist Alphaliner’s latest newsletter. It reported “The final condition stipulating that the deal must be cleared by China’s Ministry of Commerce (MOFCOM), remains outstanding.”
An “additional hurdle”, that the deal fulfils the requirements of the Committee on Foreign Investment in the United States (CFIUS) “is also pending and could thus affect the closing of the transaction”. COSCO requires CFIUS approval because it would be acquiring OOCL’s Long Beach Container Terminal as part of the deal.
COSCO will be required to pay OOIL a termination fee of US$253M if it fails to meet the deadline to acquire the Hong Kong-headquartered company – unless one of the two requirements detailed above remains outstanding at the time of the deadline, Alpahliner claimed. This would allow COSCO to leave the deal without a penalty.
The French analyst noted that “obtaining CFIUS approval appears to be the trickier of the two hurdles, and COSCO has not provided any official clarification on the status of its negotiations with the committee so far.
“While COSCO reportedly proposed to divest or carve out the OOCL-owned Long Beach Container Terminal to help ease US national security concerns, no details of any such plan have been made public until today.”
But Alphaliner said that any delay in securing the approvals may not necessarily stop the acquisition, as both COSCO and OOIL could mutually agree to extend the deadline beyond 30 June. But it warned that uncertainty could hit OOIL’s share price.