July 10 (UPI) -- China's state-owned Cosco Shipping Holdings Co. offered $6.3 billion to acquire rival Orient Overseas International Ltd., sources familiar with the deal said Monday.
Purchase of Hong Kong-based Orient Overseas, controlled by the family of former Hong Kong Chief Executive Tung Chee-haw, would form the world's third-largest shipping line after Denmark's Moller-Maersk and Switzerland's Mediterranean Shipping Co. Container shippers are pursuing mergers to lower costs, the result of an excess of available ships on the worldwide shipping market. It led to a decline in shipping rates and the 2016 bankruptcy of South Korea's Hanjin Shipping Co.
Cosco would benefit from the acquisition from Orient Overseas' routes from Asia to Australia and the United States, Han Ning of Drewry Shipping Consultants Ltd. told Bloomberg News. Cosco currently has 8.2 percent of the world shipping market; Orient Overseas has 3.2 percent.
The proposed deal must be approved by Orient Overseas shareholders; the Tung family controls 69 percent of its stock. The company's stock has risen nearly 30 percent in the past month on the Hong Kong index in anticipation of a sale.
