By Brenda Goh and Kane Wu
SHANGHAI/HONG KONG (Reuters) - COSCO Shipping Holdings Co Ltd saw its stock climb on Monday after bidding $6.3 billion for a Hong Kong peer, a deal that would see it become the world's third-biggest container shipper and underline China's supply-chain ambitions.
The offer for Orient Overseas International Ltd (OOIL) comes as China's government pushes to raise the country's profile in global shipping, which dovetails with its Belt and Road initiative aimed at increasing China's influence over distribution from Asia to Europe.
Beijing merged two shippers last year to form COSCO Shipping which, after the latest deal, will rise from fourth to rank only behind Denmark's Maersk Line and Switzerland's Mediterranean Shipping Co (MSC).
"This is negative for Maersk and MSC," said Corrine Png, chief executive of Singapore-based transport stock researcher Crucial Perspective. A deal would make the Chinese shipper a "tougher competitor to deal with on the major trade lanes."
State-backed COSCO Shipping on Sunday offered to buy each OOIL share at a 31.1 percent premium to their Friday close.
A suitor's stock often falls after making a bid, but COSCO Shipping's Hong Kong-listed shares rose as much as 6 percent on Monday to their highest price in almost two years. OOIL stock rose as per usual for a target but at 20 percent, it was short of the offer price.
Png said some investors may feel OOIL would be selling too soon after the container industry began to recover from a prolonged slowdown, or that the deal may not pass anti-trust regulators.
"This transaction is a sweeter deal for COSCO than for OOIL's shareholders," she said. "OOIL could boost COSCO's recurring profit by 50 percent in the next two to three years."
The deal comes as Hong Kong's transport hub status dims. Its fortunes soared with the Pearl River Delta export boom of the 1990s, but its once world-leading port now languishes in fifth place by throughput, behind the mainland ports of Shanghai and Shenzhen.
COSCO said it would to keep OOIL's global headquarters in Hong Kong but analysts said the city's port would still be affected by its takeover.
"COSCO also has (port) investments in Guangzhou," said Han Ning, China director for Drewry Shipping Consultants, referring to the nearby Chinese city whose port competes with Hong Kong for Pearl River Delta traffic. "So if COSCO is looking at what should be its hub for the Pearl River Delta, it will look to strike a balance between Guangzhou and Hong Kong."
OOIL commands just under 3 percent of the global container shipping market and has significant exposure to the U.S. market. After the deal, COSCO Shipping can expect a U.S. market share of 18 percent from 11-12 percent currently, said COSCO general manager Zunwu Xu at a news conference on Monday. The acquisition would also strengthen COSCO Shipping's position in the port business, Xu said.
"The merger would be complementary as OOIL is strong in Transpacific and Intra-Asia trade, and COSCO has strong China domestic trade," said Samson Lo, head of Asia mergers-and-acquisitions at UBS, which is advising COSCO Shipping.
"The terminals and logistics businesses of OOIL can bring further synergies to COSCO as well."
COSCO Shipping is making its offer with Shanghai International Port Group Co Ltd. The shipping line said it would finance the deal with a bridge loan.
(Reporting by Brenda Goh in SHANGHAI and Kane Wu in HONG KONG; Writing by Adam Jourdan; Editing by Christopher Cushing)