Maersk Sells Oil Division, Focusing on Shipping
Maersk is the biggest name in international shipping. It is the largest ocean carrier by capacity and sets industry trends with the moves it makes. Another advantage Maersk has over its competition is diversification, which put the company in a better position to handle years of overcapacity and low freight rates that resulted in billions of dollars in losses by carriers.
But Maersk is letting some of that diversification go.
Danish shipping conglomerate A.P. Moller-Maersk signed an agreement today to sell Maersk Oil to French energy giant Total for $7.45 billion in a combined share and debt transaction, the companies said.
About a year ago, Maersk split into two divisions, one to focus on shipping and the other to focus on oil. That split marked a change in strategy for Maersk Line, moving away from ordering megaships to instead grow its capacity and shrink the competition by acquiring smaller carriers.
Now it looks like Maersk is ready to let that oil division go completely, really allowing international shipping to be the focus of Maersk. Completely might actually be a little bit of a strong word. Maersk won’t lose all of the diversification it has in oil.
Desormeaux’s article went on to share:
A.P. Moller Maersk will receive a consideration of $4.95 billion in Total shares – amounting to 97.5 million Total shares, or about 3.8 percent of the company – and Total will assume $2.5 billion of Maersk Oil’s debt.
This is not a bad deal for Maersk at all: first, the company gets 7.45 billion dollars; second, it has 2.5 billion dollars of debt cleared; and third, it receives profit shares from Total in the future.
Perhaps some of this inflow of cash will be used on Maersk’s carrier acquisition strategy.
However the cash is used, this is probably a good time to move on from oil as the world is pushing to switch to cleaner energy sources.
Of course, there will still be money to be made in oil for some time to come. However, clean energy will likely supplant oil eventually. Shipping, on the other hand, will continue. It seems Maersk is looking at the long term picture.
The American Shipper article ends with a peek into Maersk’s strategy and a hint that similar deals could happen with other Maersk companies that aren’t Maersk Line in the very near future:
“The separation of the energy businesses was decided as part of last year’s strategic decision to focus A.P. Moller-Maersk’s future activities on transport and logistics, as well as a result of recent years’ oil and gas industry and market developments,” the conglomerate said. “Maersk Oil is the first of the four energy companies of A.P. Moller-Maersk for which a future structural solution has now been identified. The solutions for Maersk Drilling, Maersk Supply Service and Maersk Tankers remain to be defined before the end of 2018.”
Given Maersk’s already prestigious place in international shipping, just imagine how dominate the company may become completely focused on the transport and logistics industry.