CP Ships Ltd., the freight-shipping giant spun off from the Canadian Pacific conglomerate a few years ago, is being acquired by German travel and shipping company TUI AG in a deal valued at about $2.4-billion Canadian.
TUI announced Sunday it had agreed to buy CP Ships for $2-billion (U.S.) - about $2.4-billion Canadian - a friendly deal that the German company hopes will strengthen its Hapag-Lloyd container shipping business.
Hanover-based TUI said the Canadian company's board of directors unanimously recommended its shareholders accept the all-cash offer of $21.50 (U.S.) a share - a premium of 9.7 per cent over CP Ships' closing share price on the Toronto Stock Exchange on Friday.
"This transaction will enhance growth opportunities over the longer term and will enhance value for TUI's shareholders through CP Ships' earnings potential and the realization of synergy potential in operations and ship networks," TUI chief executive Michael Frenzel said.
"Our enlarged shipping business will be well positioned to take advantage of the strong long term growth dynamics in the container shipping industry. This is both a compelling financial and strategic opportunity for us."
CP Ships, a major competitor to TUI's Hapag-Lloyd unit, had been on the auction block for several months and rumours had the London-based freight giant being courted by Asian and European companies.
The global container shipping industry has been growing rapidly in recent years as trade between North America, Europe and Asia continues to boom and widely held companies such as CP Ships, with no controlling shareholder, become attractive takeover targets.
TUI said Sunday's proposed acquisition will accelerate the growth of Hapag-Lloyd, putting the combined company in the world's top five in terms of container shipping capacity. Between them, the companies currently operate 139 ships, with another 17 on order.
TUI hopes to complete the transaction in the fourth quarter of this year. The deal is subject to regulatory clearance in Canada, the United States, Europe and elsewhere.
CP Ships' chief executive Ray Miles said the sale of his company "represents immediate and attractive value for our shareholders and the board has recommended it unanimously."
CP Ships is incorporated in Saint John, with its executive team based at Gatwick, England.
The company, which has major operations at the Port of Montreal, was spun off from Calgary-based Canadian Pacific Ltd. a few years ago in a transaction that also saw the spinoff of PanCanadian Petroleum - now EnCana - CP Rail Ltd., CP Hotels and Fording Coal.
CP Ships is one of the world's leading container shipping companies, and owner of Montreal Gateway Terminals, which operates one of the largest marine container terminals in Canada.
TUI is Europe's largest tour operator, and its wholly owned subsidiary Hapag-Lloyd is a leading containing shipping company. TUI said Sunday that its strategy "builds on two strong businesses in tourism and shipping and enables the group to take advantage of the expected market growth in both sectors."
Hapag-Lloyd's integration plans envision possible synergy savings of about $219-million a year by the third full year after the acquisition.
TUI did not specify how they would be achieved, but said it expects to incur integration costs of about $122-million, most of them next year.
Shares in TUI closed down 5 per cent at $24.19 in Frankfurt on Friday after the German company confirmed that it was in negotiations on a possible acquisition of CP Ships.