Maersk Line’s December announcement that it planned to acquire Germany-based Hamburg Süd, the seventh largest container shipping line, from the Oetker Group inched closer to being a done deal today, when the Denmark-based largest container shipping company officials announced the signing of a sale and purchase agreement with the Oetker Group, with the boards of the Oetker Group and Maersk Line approving the agreement.Maersk officials said that the acquisition remains subject to regulatory approval and is expected to be made official by the end of this year, with the companies operating on a business as usual basis as separate and independent companies until then. The purchase price is $4 billion ($3.7 billion EUR) on a cash and debt-free basis.“Today, we have taken a decisive step towards the shared future of Maersk Line and Hamburg Süd,”said Søren Skou, CEO of Maersk Line and A.P. Moller – Maersk, in a statement. “Our due diligence confirmed that Hamburg Süd is a well-run company with strong and highly respected brands. We have confirmed the anticipated synergies and we are convinced that our plan to maximize customer retention is the right path forward. I have no doubt that together we can develop new competitive products to the benefit of our customers and exploit operational synergies. The acquisition is cementing our position as the largest and leading carrier in container shipping, and it will provide great opportunities for the employees of both companies.”Hamburg Süd is recognized as a leader in the North-South trades, said Maersk and has 130 container vessels with a container capacity of 625,000 TEU (Twenty-Foot Equivalent Units). The carrier has 5,960 employees in more than 250 global offices and markets its services through the Hamburg Sud, Chile-based CCNI, and Brazil-based Alianca brands. The company had $6.726 billion in 2015 revenue, with $6.261 billion from its container line business.When Hamburg Süd officially becomes part of Maersk, Maersk Line will have container capacity of roughly 3.8 million TEU and 18.6 percent of total global capacity share, with its combined fleet comprised of 741 container vessels with an average age of 8.7 years.Maersk officials said this acquisition matches up well with the company’s growth strategy, as it “represents a unique opportunity to combine two complementary businesses are realize sizable operational synergies as well as commercial opportunities.”And they added that the two companies combined will be able to realize operational synergies of around $350-to-$400 million annually in the first two years post-completion of the deal. Maersk also said Hamburg Süd will maintain its own structure under its separate brands while expecting to deliver high customer retention in line with Maersk’s growth plans, adding that the combined network will include more weekly sailings, faster transit times, more port calls, more direct-to-port calls, and reduce the need for transshipment. What’s more, Maersk said the cost synergies will come from the integration and optimization of networks and standardized procurement, with the global portfolio of APM Terminals expected to benefit from higher volumes, and various Latin America-based investments, too.When the deal was first disclosed in December, Maersk said that it followed a September announcement it made in which it said it planed to grow market share organically, as well as through acquisitions, with Skou noting that Hamburg Süd and Alianca will continue to operate as separate brands and through their local offices, as they have “competitive and attractive customer propositions,” which Maersk wants to keep intact.As for what the Maersk network will look like upon completion of the deal, Maersk said that Maersk and Hamburg Süd customers will have access to the dedicated end-to-end services from Hamburg Süd in the North-South trade lanes, coupled with the flexibility and reach of Maersk’s global network, while also allowing Maersk to develop new products with more direct port calls and shorter transit times.This deal comes at a time when the ocean container shipping sector continues to grapple with many challenges, including excess capacity, sluggish demand, lower profits, and a lack of pricing power and being able to have rate increases stick. These factors, and others, have led to ongoing carrier consolidations and alliances designed to retain combined customer bases and realize cost synergies like fleets and IT systems in service debt burdens, an Alix Partners report published earlier this year observed.Some recent deals and mergers and industry alliances that have come about as a result of declining ocean container market conditions include:CMA CGM acquiring Neptune Orient Lines;the Ocean Alliance comprised of COSCO Shipping, CMA CGM, Evergreen Marine, and Orient Overseas Container Line Limited (OOCL);the 2M Alliance of Maersk and MSC;the October announcement that K Line, Mitsui O.S.K. Lines Ltd., and Nippon Yusen Kabushiki Kaisha have agreed to establish a new joint-venture company to integrate the container shipping businesses (including worldwide terminal operating businesses excluding Japan) of all three companies and to sign a business integration contract and a shareholders agreement; andthe merger of Hapag-Lloyd AG and United Arab Shipping Company S.A.G. (UASC)Ben Hackett, founder of maritime consultancy Hackett Associates, said that this deal was somewhat expected, in that Maersk was the only European carrier with the financial resources to pull if off, as well as having a company culture similar to Hamburg Sud. And he added that Hapag Lloyd was probably not in the running, due to financial constraints, as well struggling to integrate UASC.“It is a nice fit for Maersk, strengthens their Latin American and ANZ (Australia-New Zealand) exposure and puts them in a powerful position with regard to refrigerated transport of goods,” said Hackett. “It’s also seasonal, but less exposed to economic ups and downs as people still need to eat whatever the economy is doing. They gain CCNI and Allianca as part of the deal, and it makes them the strongest player on both coasts of South America, moving fruit and vegetables on the west coast and meat on the east coast. It will take some time for Maersk to get this through the EU Competition Commission, but they will have the support of the German Government, I am sure. It also makes Maersk virtually untouchable in terms of size as a world class carrier.”This deal marks another attempt to consolidate the industry by multiple trade lanes, according to Dean Tracy, logistics and global supply chain consultant, at Global Integrated Services, LLC.“While Hamburg Süd is not big in the FE (Far East)/US trade lane, it is [big] on the North and south routes, but what it means it is that the carriers will have further control on capacity and therefore a greater opportunity to increase rates and an honest opportunity to make them stick.”