APL sale raises traffic question

Railway Age, May, 1997

APL Limited, the global container shipping line that prodded U.S. railroads into launching a nationwide network of intermodal doublestack operations, is being acquired by Singapore-based Neptune Orient Lines LTD for approximately $825 million.

The implications for railroad traffic-pattern changes are uncertain, but they could be significant. Early on, APL-- American President Lines--developed a close relationship with Union Pacific, and it has been UP's biggest intermodal customer. But NOL recently signed a multi-year contract with Burlington Northern Santa Fe. While no near-term changes in patterns are expected and nobody is commenting about the future, speculation about long-term routings is probably inevitable.

Making APL a wholly-owned subsidiary of NOL will create a company with combined revenues of about $4 billion (us), and with a fleet of 113 vessels, including 76 container ships with a total of about 200,000 TEUs in capacity. NOL has 36 container ships with 10 more on order; APL's container fleet numbers 40 vessels. Last year, NOL's container volume was 746,000 TEUs, APL's was 1,061,000 TEUs, which accounted for 86% of its total revenues.

NOL, which also operates 30 tankers and seven bulk carriers, is strong in Europe-Far East and Far East-U.S. trade via the Atlantic route; APL is a leader in trans-Pacific trade, and both companies have extensive intra-Asia networks.

NOL and APL hope to complete the acquisition in the fall of this year. Directors have approved the deal, and APL shareholders will vote on it later. The transaction will also have to satisfy requirements of the Hart-Scott-Rodino Antitrust Improvements Act, the ExonFlorio Amendment, and the U.S. Maritime Administration.

Tim Rhein, APL chairman and CEO, who will be asked to become a director of NOL, says "this combination of the complementary APL and NOL route systems, service organizations and intermodal assets creates a global container line with resources to provide customers comprehensive and efficient worldwide shipping services."

The merger, Rhein said, "in no way lessens APL's commitment to the U.S. flag and American seafaring labor as part. of our commitment to the Maritime Security Program .... We fully expect to ensure the continued availability of U.S.-flagged and -crewed ships as well as all the network resources of APL for participation in these programs."

NOL, meanwhile, says that APL will retain its name and Brand in the market, and that operations will continue under existing management from APL's Oakland, Calif., headquarters.

Lua Chan Eng, deputy chairman and CEO of NOL, says that significant cost savings--estimated at an annual minimum of $130 million--will come from consolidation of certain operations and improved efficiencies, "including enhanced network optimization, streamlined information technology systems, improved box utilization, lowered inland costs and reduced terminal expenses."