Zim-Hapag-Lloyd deal thrown back to square one by state opposition
The Government Companies Authority has ended its review of the original transaction and will require a fresh application for any revised structure.
In a dramatic development, the Government Companies Authority informed Zim on Tuesday evening that it had concluded its review of the company's original application for approval of its proposed deal with Hapag-Lloyd and FIMI, Calcalist has learned. The Authority will no longer review the original deal structure. If Zim and the acquiring parties wish to submit a new proposal, the approval process will have to begin again. The Authority has stipulated that any new proposal must first be approved by the boards of directors of Zim, Hapag-Lloyd, and FIMI.
The Authority's decision is significant because Zim's board of directors must now decide whether to proceed with the acquiring parties under a new framework or seek alternative buyers for the company.
The Authority issued the notice after Hapag-Lloyd and FIMI indicated that they intended to submit a proposal for a revised deal structure but had not yet done so. As a result, the Authority has halted its review of the original structure, effectively returning Zim to square one in its dealings with Hapag-Lloyd, even though several months remain before the deadline for satisfying the deal's conditions precedent.
Approval from the Government Companies Authority is required because of the terms attached to the "golden share" held by the State in Zim. Those terms have led the Ministry of Finance, the Prime Minister's Office, and other relevant government ministries to oppose the proposed deal. The Government Companies Authority is responsible for representing the State in matters concerning the golden share, coordinating the positions of the various government ministries, and deciding whether to approve the transaction. While the Authority has not formally rejected the deal, it has effectively taken the original proposed structure off the table.
In a letter to Zim, the Authority stated: "Since Zim submitted its request for approval of the transaction in March, the relevant state bodies have worked to formulate their professional positions regarding the proposed deal structure and have invested significant resources in the process. The positions of the various government ministries have been conveyed to the Authority, and the review of the original structure is in its final stages."
The Authority added that Zim's most recent letter raised the possibility of submitting an updated deal structure that would differ significantly from the original proposal. "As the required documents were not submitted by the deadline you were given, I hereby announce the termination of the process initiated in recent months regarding the original structure; we now regard the application concerning the original structure as no longer valid, and the handling of it is concluded."
The letter continued: "Since you submitted only a list of principles rather than a binding document, noting that the latter would take time to prepare, I hereby inform you that the processing of all your requests regarding the Zim transaction has concluded."
The Authority is allowing Zim to submit a new application by October 6. Zim and Hapag-Lloyd are not expected to simply resubmit the original application, given the widespread opposition to that structure. If Zim and the acquiring parties seek approval for a different framework, the Authority has stipulated that the new application must be comprehensive and detailed, receive approval from the boards of directors of Zim, Hapag-Lloyd, and FIMI, and include full information on the revised transaction.
The review of the deal by the Government Companies Authority and the relevant government ministries has been ongoing since March, a period of approximately six months. If a new application is submitted, it is also expected to take several months to review. This raises questions about whether the parties will be able to obtain all the necessary approvals within the existing timetable.
The deadline for satisfying the deal's conditions precedent is February 2027. If the only outstanding condition at that point is approval from the Government Companies Authority, the deadline may be automatically extended until June 2027.
If Zim's board decides to proceed with Hapag-Lloyd, a new application would be submitted and reviewed from scratch, this time under a tighter timetable. Zim's ability to withdraw from the transaction is limited and depends on changes to the terms of the deal involving Zim itself, rather than changes agreed between the acquiring parties and the State.
Despite the significant obstacle placed in the deal's path by the Government Companies Authority, the transaction remains on the table unless Zim itself decides to withdraw. The Authority and the relevant government ministries would then have to consider the new terms proposed by FIMI and Hapag-Lloyd and determine whether they address the State's demands.
People close to the deal remain convinced that the transaction is still viable and that new terms can be agreed within the existing timetable. But reaching a new structure that satisfies both the State's demands and the business requirements of Hapag-Lloyd and FIMI will be difficult. A substantially revised deal could also make the transaction less attractive to the German shipping company.
