CMA CGM S.A., a Paris-based shipping group, announced the sale of its port terminal to raise $ 2 billion for acquiring CEVA Logistics, a Swiss-based management solution company.
An agreement was signed on November 25, 2019, between CMA CGM and Merchants Port Holding Co., a Chinese shipping company, to initiate a joint venture of the port assets to buy CEVA Logistics.
Terminal Link Deal
CMA CGM agreed to share its 10 port terminals and the Terminal Link, Merchants Port Holding to raise funds worth $ 968 million for CEVA. The Terminal Link deal between the two companies is likely to be concluded in early 2020.
According to the Chief Financial Officer of CMA CGM, Michel Sirat, the deal will not affect the existing pattern of ownership of the Terminal Link, in which CMA CGM and Merchants Port Holding account 51% and 49% shares, respectively.
The latter company is expected to provide capital of $ 468 million and loan the remaining amount to be converted into marketing capital by CMA CGM over eight years.
CMA’s to Raise $ 2 billion for Expansion
CMA CGM is reported having a net profit of $ 45.4 million in the third quarter of 2019. The CEO believes that the company is likely to improve its annual revenue by reducing global freight rates.
The company has devised a plan to implement a short-term financial objective for CEVA from 2020, while its medium-term financial objectives is an annual turnover target of $ 400 million, which is likely to start from 2023.
Beside the $ 2 billion required t buy CEVA, CMA CGM plans to increase its marketing capital by another $ 2 billion. For additional capital, the company plans to sell its subsidiaries in various countries.
The company expects an income of $860 million from the sale and leaseback of its ships, $93 million from selling its logistics platform in India, and $100 million from CEVA’s division dealing in a securitization program.
Michel Sirat states, “We have a lot of assets and we will use them fully”. He further adds, referring to the short-term plan, “In line with the CEVA Logistics acquisition financing plan, the Group has tightened its capital structure by divesting and refinancing certain of its assets”.
As analyzed by CMA CGM, CEVA’s new Marseille-based operation will be able to ensure “disciplined management of its logistics operations and generate revenue synergies with the signing of several new contracts”.
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