Sep 26, 2016

Maersk Group new business strategy may include liner acquisitions again

Soren Skou, Group CEO of A.P. Møller Mærsk A/S

Maersk Group announced its new business strategy on Sept. 22, revealing plans to focus its management resources in transport and logistics divisions comprised of containership, logistics, and port operations going forward. At the same time, it also revealed plans to look into separating its oil development division. Given the stagnant state of the shipping market and the deteriorating business environment due to depreciation of crude oil prices, the company will reorganize its operations into two divisions, which will each move forward with new growth strategies. Maersk Line, which is a core part of its transport and logistics division, will aim to expand its market share, which may include acquisitions, going forward. Its oil-related departments will look into mergers with other companies and gaining stock market listing going forward, with the goal of arriving at a conclusion within two years. Its new structure is slated to begin in 2017.

Former Maersk Group CEO Nils Andersen left his position with the company at the end of June, but Soren Skou, whose post has been CEO of Maersk Line thus far, has now also taken on the role of group CEO. With the spin-off of its new structure, the company has also begun work on hammering out new business strategies. One reason for the move is the deterioration of the overall business environment. Due to extreme stagnation of container freight rates, Maersk Line, whose business centers on containers, fell into negative earnings for the second quarter of this year (April-June), with a final tally of $151 million in negative earnings. Other divisions also saw decreases in profits, including APM Terminals, Maersk Oil, and Maersk Drilling.

Beginning next year, Maersk Group will reorganize its subsidiary operations into two divisions, namely its transport and logistics division and its energy division. In addition to Maersk Line, its transport and logistics division will amalgamate APM Terminals, Damco, port-related service provider Svitzer, and container fabrication company MCI. After having merged the five businesses, it will create a multi-brand system that will allow each to maintain its previous brand. Through the merger, it will attempt to optimize operations and asset management, while also trying to create synergy between its operations. It has also stated that it is looking in particular at acquisitions as a main method of investment.

Maersk Line has continued to expand the size of its own fleet in conjunction with cargo movement growth seen thus far, and has followed a policy of distancing itself from expanding its actual market share. With its new business strategy, however, it has revealed plans to expand its market share, as well as pursuing not only autonomic growth but also considering the option of acquiring other companies. In addition, Damco will partner with Maersk Line with the goal of offering new solutions utilizing digital technologies. Svitzer and container fabrication division MCI will also reinforce their partnerships with Maersk Line and APM Terminals.

As for its energy division, it will maintain four companies, namely Maersk Oil, Maersk Drilling, Maersk Supply Service, and Maersk Tankers. In addition to Qatar, the U.K., Denmark, and Algeria, Maersk Oil also currently holds mines in locations such as Kazakhstan, but going forward it will concentrate its operations and investments in the North Sea region where its strengths lie, such as the U.K., Denmark, and Norway. Going forward, it will also reign in its investment scale related to Maersk Tankers and offshore-related operations. It plans on considering splitting off its energy division in the future, and will consider other options such as mergers with other companies and gaining listing on stock markets. Maersk Group has commented that the transport and logistics division and energy division exist in different environments, and separating the two will allow it to move forward more flexibly with new growth strategies.

Under its new structure, Skou will continue to function as group CEO while also acting as CEO of the transport and logistics division. Jacob Stausholm will be appointed as group CFO as of Dec. 1. APM Terminals CEO Kim Fejfer will leave his position effective Oct. 1. Skou has commented that the new structure will allow the transport and logistics division to improve its cost competitiveness and services that utilize IT, and make for more efficient use of its assets. He also noted that Maersk Oil will grow its geographical strengths, which will allow it to move forward with new growth strategies not used previously.

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