[Updated] A.P. Moller-Maersk to Split into Transport, Energy Divisions
Danish shipping and oil conglomerate A.P. Moller-Maersk said on Thursday it will separate its businesses into separate transport and energy divisions in a bid to better tackle the problems facing its struggling businesses.
The focus will be on establishing an integrated transport and logistics company, while its oil and oil-related business will either individually or in combination be separated from the company, Maersk said.
Transport & Logistics will consist of Maersk Line, APM Terminals, Damco, Svitzer and Maersk Container Industry based on a one company structure with multiple brands. The mission of these businesses is to enable and facilitate global supply chains and provide opportunities for our customers to trade globally.
Chairman of the Board, Michael Pram Rasmussen says: “The industries in which we are operating are very different, and both face very different underlying fundamentals and competitive environments. Separating our transport and logistics businesses and our oil and oil related businesses into two independent divisions will enable both to focus on their respective markets. This will increase the strategic flexibility by enhancing synergies between businesses in Transport & Logistics, while ensuring the agility to pursue individual strategic solutions for the oil and oil related businesses.”
The 112-year-old group said in June it had asked new chief executive Soren Skou to look into potentially breaking up the group, whose shipping and energy operations are both struggling.
The main growth focus of the company going forward will be delivering best in class transportation and logistics services as an integrated transport and logistics company, said the company in a statement. Building on the group’s unique position within container transport and port operations, and significant position in supply chain management and freight forwarding, Transport & Logistics will leverage its leading position through new product offerings, digitalized services and individualized customer solutions.
Investors gave the news a cautious welcome, with Maersk shares trading slightly higher on Thursday. But some said the $30 billion company had not gone far enough.
"It might be one of the most pain-free solutions relative to other scenarios, but they could have gone even further," Nykredit analyst Ricky Rasmussen said on Thursday.
The weak market has hit the big lines which have invested heavily in "mega-ships", largely to operate the main Asia to Europe trade route. Industry sources have questioned whether there is enough work for the biggest container vessels on the high seas at the moment, putting more pressure on profits.
Energy Division
Energy will consist of Maersk Oil, Maersk Drilling, Maersk Supply Service and Maersk Tankers.
The board of directors expects that its oil and oil related businesses will require different solutions for future development including separation of entities individually or in combination from A.P. Møller - Maersk in the form of joint-ventures, mergers or listing. Depending on market development and structural opportunities, the objective is to find solutions for the oil and oil related businesses within 24 months.
Meanwhile, Maersk's oil business is struggling with a 60 percent drop in crude prices since mid-2014 and in August, the group posted a second-quarter net profit of $101 million, well below the $196 million expected by analysts.
"Maersk Oil...is a small player, so there are many players big enough to take (it) in. Drilling is relatively large, but its competitors are under extreme financial pressure, so it's less likely to find an sale opportunity there," Morten Imsgard, an analyst at Denmark's Sydbank, said.
Strategic Agility
Skou says: “Both Energy and Transport & Logistics have strategies positioning them for growth and strategic agility. Transport & Logistics will be able to provide new and digitized world-class solutions for customers, while at the same time capture functional cost synergies and better utilization of existing assets. Energy is well positioned to leverage Maersk Oil´s expertise and gain scale in select geographies, particularly in the North Sea. Its structural agility will enable management to pursue new and different structural solutions and investment.”
Otto Friedrichsen, equity strategist at Danish asset manager Formuepleje, with around 45 billion Danish crowns allocated in bonds and equities, has shunned the shipping industry including Maersk, and was sceptical about the split.
"I still want to see changes in the underlying markets and don't see this as creating any value here and now."
Maersk shares have risen more than 20 percent since June in anticipation of the strategic review and at 1026 GMT, they were trading 0.9 percent higher at 9,990 crowns.
Some said Maersk had done as much as it could given market conditions.
"It was as far as Maersk could go right now, because they could not have a ready-made solution for the energy division in these markets, if they also want to realize a decent price for the assets," Sydbank's Imsgard said.
Management Changes
The management of A.P. Møller - Maersk will be changed as follows:
• Søren Skou will continue as Group CEO of A.P. Møller - Maesk and CEO of the Transport & Logistics division,
• Claus V. Hemmingsen will be appointed Group Vice CEO of A.P. Møller - Maersk effective on October 1, 2016, and CEO for the Energy division,
• Jakob Stausholm will be appointed Group CFO of A.P. Møller - Maersk as of December 1, 2016. On the same date, Group CFO Trond Westlie will step down as member of the registered management and leave the Group,
• Jakob Thomasen will step down as member of the registered management and CEO of Maersk Oil effective on October 1, 2016, and will leave the Group on November 1, 2016.
• Kim Fejfer will step down as member of the registered management effective on October 1, 2016, and as CEO of APM Terminals effective on November 1, 2016, when he will also leave the Group.
APM Terminals
The new CEO of APM Terminals will be Morten Engelstoft, currently CEO of APM Shipping Services and CEO of Maersk Tankers. Morten Engelstoft’s appointment is effective November 1, 2016.
“Morten Engelstoft has a strong track record of delivering results, deep operational experience and is an excellent people leader. I am confident that APM Terminals under Morten's leadership will continue to thrive as one of the world's largest terminal operators and successfully execute on APM Terminals’ priorities of costs, productivity and winning new profitable third party business,” says Skou.
Maersk Oil
The new CEO of Maersk Oil will be Gretchen Watkins, current Chief Operating Officer in Maersk Oil. Grethen Watkins will take up the role as CEO of Maersk Oil effective October 1 2016.
“Gretchen most recently served 2.5 years as Chief Operating Officer and a member of Maersk Oil's Executive Team. During her COO tenure, she has proven her ability to drive change and operational excellence in Maersk Oil’s portfolio. Gretchen is well-placed and prepared to lead Maersk Oil into the next strategic phase of materializing the sanctioned projects, substantiating Maersk Oil’s position as a leading company in the North Sea and optimizing the economic value and profitability of the current portfolio. I very much look forward to a close cooperation and partnership with Gretchen to see Maersk Oil through the current challenging times in our industry,” says Claus V. Hemmingsen, Group Vice CEO in A.P. Møller - Mærsk.
Maersk Drilling
Jørn Madsen has been appointed CEO of Maersk Drilling. Jørn Madsen is currently CEO of Maersk Supply Service a role he has held since 2015. He will assume his new position after a replacement is named as CEO of Maersk Supply Service.
“Before taking up the CEO role for Maersk Supply Service, Jørn Madsen served for almost 25 years in Maersk Drilling, most recently as COO. In that capacity, he was instrumental in executing on Maersk Drilling’s growth strategy and laying the foundation for the company’s operational excellence success. I am confident that he and the management team going forward will successfully enhance and execute on our current strategy focusing on delivering high quality performance and securing revenue with our existing assets.” says Hemmingsen.
Maersk Tankers
Christian M. Ingerslev has been appointed CEO of Maersk Tankers taking effect as of November 1 2016. Christian has since 2014 been CCO of Maersk Tankers.
“Christian M. Ingerslev has for 15 years been with Maersk Tankers where he has held a number of different leadership roles. He brings with him a deep passion for and profound knowledge of Maersk Tankers’ business combined with strong leadership skills. Christian has been an instrumental part of the development and execution of the Maersk Tankers strategy “Taking Lead”, and he is ideally positioned to take over the helm as CEO for Maersk Tankers. I look much forward to working with Christian in his new role," says Hemmingsen.