HAPAG-LLOYD has confirmed it will buy Israeli carrier Zim in a deal valued at $4.2bn.

The agreement for a cash deal at $35 a share is still subject to regulatory approvals in Israel.

However, the involvement of Israeli investor FIMI Opportunity Funds indicates that the longstanding issue of how to deal with the Israeli government’s strategic interest in the line has now been dealt with.

FIMI, Israel’s largest and leading private equity fund, will take ownership of a carved-out container liner business 'New Zim' and assume responsibility for the state’s golden‑share obligations.

Hapag-Lloyd will acquire Zim’s international operations, including its 99 chartered vessels.

Zim’s management will remain in Israel, and a portion of the fleet will stay Israeli‑owned.

Any sale of more than 24% of Zim’s shares requires state approval, and both shareholder and regulatory sign‑offs remain outstanding.

For Hapag-Lloyd, the combination would cement its position as the world’s fifth‑largest container line, with a fleet of more than 400 vessels, of some 3m teu capacity, widening the gap between the German carrier and the sixth-biggest carrier ONE, with 2.1m teu. Annual volumes would also exceed 18m teu.

Vespucci Maritime founder Lars Jensen estimates an addition of 611,000 teu of capacity with Hapag-Lloyd’s takeover of Zim’s leased vessels.

It also narrows the gap with the fourth-biggest carrier, Cosco, which has a 3.6m teu capacity. Taiwanese containership operator Wan Hai Lines would also be elevated as a top 10 container line upon Zim’s exit from the box sector elite.

The deal will also give Hapag-Lloyd a leg-up on the world’s biggest container carrier, Mediterranean Shipping Co, which currently has a vessel-sharing agreement with Zim.

“Once in place, this would have a negative competitive impact on MSC and a positive [impact] on Gemini, especially in the Pacific trade,” Jensen said.

“MSC and Zim presently have vessel-sharing agreements in place on six transpacific services. After the takeover is completed, the current Zim volumes would move onto the Gemini network.”

The carrier expects the merger to generate several hundred million dollars in annual synergies and significantly strengthen its network across the Transpacific, Intra‑Asia, Atlantic, Latin America and East Mediterranean trades.

“Zim is an excellent partner for Hapag-Lloyd,” said Hapag-Lloyd chief executive Rolf Habben Jansen. “Customers will benefit from a significantly strengthened network... and we commit ourselves to building a very substantial and long-term presence in Israel.”

“Hapag-Lloyd and Zim will remain competitors and do ‘business as usual’,” Hapag-Lloyd said in a statement.

Combined network to boost Hapag-Lloyd’s transpacific presence

Of Zim’s 99-strong fleet which would be taken over under the agreement, all are chartered through either long-term agreements, from leading tonnage providers including Eastern Pacific Shipping and Seaspan, or via the spot charter market.

“Zim’s modern fleet provides good exposure to a number of important trades and their chartered ships will provide us the flexibility that we need,” said Habben Jansen, who noted that Zim’s long-term chartered tonnage includes 40 LNG dual-fuel ships.

He added; “The LNG dual-fuel share of Zim’s fleet is comparable with Hapag-Lloyd.”

While Habben Jensen noted that chartered tonnage provides flexibility to adjust cost base he admitted that the high Zim percentage of chartered ships might be on the high side; “We might bring that down a bit in time.” 

With the deal not likely to be in place until the end of this year at the earliest, he noted that it was too early to discuss any effect on the Gemini Collaboration with Maersk.

But the combination of Hapag-Lloyd and Zim will add scale to its service networks, especially in trade lanes where the company is not so strong.

In particular, combining Hapag-Lloyd’s and Zim’s operations on the transpacific trade would boost Hapag-Lloyds capacity from its current 7% to 12%.                 

But Habben Jansen expects limited effect on Hapag-Lloyd’s 22-strong container terminals operated by its Hanseatic Global Terminals subsidiary. 

“I don’t expect a massive impact on HGT - if anything it should be positive as we might get some volume gains.”

Regarding any potential opposition from the Israeli government, Habben Jensen said he believes Hapag-Lloyd has put forward “a very good solution” for the ownership of Zim and cited previous successful takeovers of other container lines by Hapag-Lloyd including CP Ships, CSAV and UASC.

Obstacles on the horizon

Globes, an Israeli business paper, reported on Sunday that the onshore workers of Zim in Israel, currently around 1,000 people, have declared a strike at the company’s headquarters.

It is unclear whether such a strike would involve the entire workforce.

According to the Globes report, Hapag-Lloyd has guaranteed employment for these workers for one year in its drafts.

Calcalist reported that only 120 out of the 1,000 employees at Zim will be retained following the acquisition, as operations in Israel will be consolidated.

The workers’ union is demanding that all 1,000 employees will be guaranteed jobs, in addition to grants worth millions following the acquisition.

Furthermore, the current ownership structure of Hapag-Lloyd could subject the deal to possible opposition by the Israeli government.

The Qatar Investment Authority and the Public Investment Fund of Saudi Arabia own shares of 12.3% and 10.2%, respectively, in Hapag-Lloyd. Given the state of the current geopolitical situation in the Middle East, Israel may not be in favour of the acquisition.