The proposed takeover of Orient Overseas International Lines (OOIL) by COSCO Shipping could be hindered by worsening China-US trade ties and the Trump administration’s efforts to curtail Chinese investments in the US.
According to Alphaliner, investors’ enthusiasm for OOIL’s proposed takeover by COSCO seems to have dampened as OOIL’s share price dropped to HKD 69.25 on April 10, its lowest closing price since July 7, 2017 when the general cash offer at HKD 78.67 per share was unveiled.
The shares are now trading at a 12 percent discount to COSCO’s offer price, with investors increasingly concerned that the deal could be blocked by US regulators, Alphaliner said.
Although the COSCO-OOIL deal has already passed the US’ Hart-Scott-Rodino anti-trust review in October 2017, it still requires approval from Committee on Foreign Investment in the United States (CFIUS).
COSCO earlier informed that the deal is to be completed by June 30, 2018. If the company fails to complete the deal by the deadline, OOIL will receive a break fee of USD 253 million, however, the fee would be waived if the transaction fails to meet the requirements of CFIUS, Alphaliner concluded.