During the third quarter 2021 conference call on November 11, coastal shipping specialist Log-In Logística Intermodal (B3:LOGN3) dismissed any rumors of a possible withdrawal from B3, the Brazilian stock exchange. Geneva-based MSC is sticking to its target of acquiring a controlling interest of 62% to 67% in Log-In.
While answering a question about a possible redesign of Log-In’s operational routes and commercial strategy after the MSC takeover, CEO Marcio Arany commented: “MSC has already requested authorization for the operation at CADE [Brazilian competition regulator]. We cannot disclose anything until the operation is completed. MSC would have up to 67% of Log-In, but Log-In would remain a listed company. Our capacity to work with MSC under the new condition is similar to what we have today, with all information reservation that all Log-In shareholders have”.
On the evening of September 15, MSC disclosed its intention to acquire the control of the Brazilian company through a public tender offer. The Swiss shipping giant offered R$ 25 per share, a 67% premium over the closure price that day (R$ 14,95) and currently a 17.5% premium over the closing price on November 12 (R$ 21.27). After reaching a maximum of R$ 22.85 on October 14, the stock has been shedding value ever since, as are most Brazilian listed companies, due to bleak macroeconomic prospects in the country.
The MSC offer is likely to be successful with current Log-In stockholders. Alaska Asset Management, the largest one with a 45% stake, already accepted the terms on September 17. The second-largest shareholder is Tarpon Investimentos, which holds a 10% stake, but has not yet disclosed its intentions. If it greenlights the offer, MSC would not have to convince too many additional investors. The following 10 stockholders collectively own 27% of Log-In, according to public filings.
The acquisition of a controlling stake in Log-In by one of the container shipping majors would mean the end of the last independent coastal operator in Brazil and the closing chapter of market consolidation in the country.
After Maersk acquired Hamburg-Süd in 2017, it inherited Aliança Navegação from the German operator, but sold Mercosul Line to CMA CGM subsequently. The move to offload Mercosul Line was a preemptive one by Maersk, which had acquired it 11 years prior. It increased the chances that CADE would approve the deal, as it finally did a few months later. Leaving a third of Log-In stock still trading at B3 might be a similar move by MSC. Another argument in favor of the transaction is the “BR do Mar” cabotage law reform under discussion in the Brazilian Congress. If approved as expected in early 2022, it would increase competition and reportedly lower barriers to entry in the coastal shipping business.
It remains to be seen if CADE board members agree with Mr. Arany assessment that the Log-In and MSC operational relationship will indeed be “similar to what we have today”. Although Norsul operates a short feeder route between Rio de Janeiro ports since 2020, the pending Log-In transaction would result in the container coastal market being essentially controlled by just three European companies: Maersk, CMA CGM, and MSC.
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