Zim Posts Positive Q2 Results, But Hapag Merger Faces Regulators' Scrutiny

Israeli container carrier Zim posted solid results for the second quarter this year, turning a small profit on $1.8 billion in income, but its share price fell by four percent in early trading - perhaps because of the announcement that Brazil's competition regulators would thoroughly review its proposed merger with Hapag-Lloyd.

The quarterly results are an improvement: revenue was up nine percent year-over-year, driven by strengthening volumes in the Asian and transpacific markets. Average freight rates also strengthened, increasing earnings further. EBITDA came in at nearly $500 million, resulting in net income of about $64 million.

But for investors, the focus is on Zim's prospects as a possible component of the Hapag-Lloyd empire. In April, Zim's shareholders approved a $4.2 billion merger that will see Hapag-Lloyd and Israeli investment company FIMI buy all of Zim at a healthy $35 per share, then delist it from the NYSE. Hapag will keep most of the line's global operations and chartered-in tonnage (Zim's fleet is overwhelmingly chartered). FIMI will keep Zim's routes to and from Israel, along with 16 owned vessels, preserving the carrier's national-defense role.

While overwhelmingly popular with Zim shareholders, the plan is opposed by Israel's defense ministry, according to local outlet Calcalist: the ministry's analysis found that the small Israeli component of Zim under FIMI would be too concentrated in the Mediterranean, giving Israel too little global logistical reach. A fully global Zim also insulates Israeli supply lines from the possibility of sanctions, which would be a deterrent to blue-chip carriers but a secondary consideration to a national-champion shipping company.

Hapag-Lloyd and FIMI have taken steps to address these concerns and assure the preservation of Israeli jobs, but Calcalist reports that a majority of Israeli government ministries are expected to oppose the merger - including the ministries for shipping, economy and defense. Israeli ministers are meeting in early September to share perspectives on the deal.

The proposed merger also faces a thorough antitrust review in Brazil. The country's competition authority, CADE, is carrying out a full investigation of the proposal focused on three routes that connect Brazil with the rest of the Americas, according to Alphaliner. The regulator has the statutory leeway to continue its review until the end of March 2027, well past the 2026 deadline that Hapag and Zim still hope to meet.