Investment and Management Set for HHLA as MSC Acquisition Offer Proceeds
The executive and supervisory boards of Hamburg port operator Hamburger Hafen und Logistik (HHLA) issued their formal recommendation to the shareholders to accept the proposed acquisition of the company’s common stock by Mediterranean Shipping Company (MSC). As part of issuing the recommendation, they also announced that extended commitments for the long-term development of HHLA, its governance, and management have also been reached.
“An agreement on key aspects related to securing HHLA and its business model in the long term has been reached,” the company said announcing its support for the offer. “In the coming weeks, individual points of the BCA (Business Combination Agreement) that have not yet been finalized in the binding preliminary framework agreement will be worked out in further discussions,” they said. They reported that under the formally required review by regulators, the boards have concluded the offer is “in the best interests of all the company's stakeholders.”
Subject to the approval of the Hamburg Parliament, the City of Hamburg and MSC have agreed to provide HHLA with €450 million ($482 million) in additional equity capital to be used for investments in business operations over the next few years following the closing of the transaction. The City of Hamburg and MSC will also support the corresponding investment plans which total at least €775 million ($830 million) between 2025 and 2028.
These points are in addition to MSC’s agreements with the city as part of the proposed acquisition. MSC previously committed to increasing its operations in the port expanding cargo throughput in HHLA terminals starting by 2025 and reaching a minimum of 1 million TEU from 2031. The company also committed to building a new office in Hamburg and employing between 500 and 700 people in Hamburg.
As part of the binding preliminary framework agreement, HHLA reports that MSC has now committed to no layoffs for operational reasons for at least five years. HHLA will also retain decision-making authority over its investment planning, and in particular, the ongoing modernization of HHLA's container terminals in Hamburg and the international expansion of the intermodal network in the coming years.
The neutrality and independence of HHLA's business model, in particular of the intermodal subsidiary Metrans, will also be maintained. All customers will continue to have equal access to all HHLA terminals and services throughout Europe, with the strategy continuing to transform HHLA through the expansion of the European intermodal network into a logistics company.
“We welcome the confirmation of HHLA's investment planning for the coming years and the additional equity commitment of €450 million from the two major shareholders. This gives us considerable additional resources to drive forward HHLA's successful development into a leading European logistics company even more actively and rapidly, opening up significant development and business opportunities,” said Angela Titzrath, Chief Executive Officer of HHLA.
Under German securities laws, the boards were required to review the offer and obtain independent opinions including a Fairness Opinion within two weeks of the release of the offer. MSC, after receiving regulatory approval, began the offer of €16.75 per Class A share on October 23. The offering ends on November 20 and calls for MSC to own 49 percent of the company while the city will retain control with all the preferred shares equal to a 51 percent position. Closing of the transaction is subject to certain regulatory approvals and the approval of the Parliament of the Free and Hanseatic City of Hamburg.