NYK has tendered an offer to take 100% ownership of its subsidiary Yusen Logistics, with a buyout offer equal to 25.6 billion yen ($224.8m).
The Japanese shipping company currently owns 59.5% of Yusen Logistics, which was established in 2010 through the combination of NYK Logistics and Yusen Air & Sea Services. The remaining shares are owned by a number of investment banks, including The Bank of Tokyo-Mitsubishi. The buyout is expected to be complete by late March 2018.
Yusen Logistics provides global freight forwarding and supply chain services to a range of industries, including automotive, and is currently worth 4.3m yen.
NYK said the move to buy Yusen out completely was in response to significant changes in the shipping industry and was part of a three-part business strategy designed to strengthen its global logistics offering by deepening the collaboration of each business and strengthening its sales capabilities.
In a statement issued this week, the company said the shipping industry it belonged to was facing “significant changes in its operating environment due to the recent structural changes in the demand for energy, the increase in geopolitical risk, and other such changes.”
Sharp fluctuations in container freight rates because of excess shipping capacity have led to a sluggish market and unstable earnings, according to the company. Likewise, there has been an oversupply of new and bigger vessels in the dry bulk carrier industry that, combined with deceleration in the Chinese economy, has led to the lowest rates in the history of outbound bulk shipping (though second quarter results for NYK have been more positive).
In response, the company said it would be moving toward an asset-light business model and reducing its fleet of owned vessels, as well as those on long-term charters. At the same time, it said it would be expanding short-term chartered vessels and its non-asset based forwarding business.
Integrating vehicle logisticsNYK’s objectives through the takeover include integrating “automobile-related logistics” and project cargoes, something it said was part of a move to expand beyond traditional shipping and secure stable freight rates. It also said it would be sharing information, technology and systems across the business units with the aim of enhancing technological development.
Finished vehicle shipments have been a bright spot for NYK during the historically low freight rates elsewhere in the bulk shipment market. Last year the company said it had taken advantage of robust demand for car shipments to North America and Asia by steadily and effectively assigning vessels to those regions. It has also commissioned a series of “highly fuel-efficient ultra-large carriers” that it said have contributed to results on this side of the business.
It has also established a number of automotive subsidiaries with partners in countries from China to Columbia.
On the container side of the business, from the beginning of next year the company will integrate services with Mitsui OSK Lines (MOL) and K Line under the Ocean Network Express (ONE) joint venture, in which NYK will take a 38% share.
Elsewhere, the company said that in accordance with its medium-term management plan it would be strengthening resilience to the unstable shipping market, as well as building competitiveness through differentiation from other companies.
At this stage, the company is making no further comment but an executive statement is expected once the tender offer period ends on December 14th this year.
