Seatrade Maritime: Cash stockpile gives Zim options for its future

In the weeks following the Marine Money presentation by Evercore banker Mark Friedman detailing the shrinking realm of listed shipping companies, all investor eyes are focused on ZIM (NYSE: ZIM). 

ZIM, which gained its public listing at $15/share in early 2021, had been the darling of equity buyers as it surged during the supply chain crunch of 2021-2022. At its highest levels, in March 2022, its share price had reached up to $84, before backing down. From early 2023 to the present, its price has languished, with prices not exceeding $25/share. 

In recent months — at a time that the Red Sea might be opening up, easing pressure on tonnage supply, and possible acquirers are circling around — ZIM has been weighing its future plans. 

ZIM’s Board rejected a “take private” bid from a group led by the  company’s CEO,  reportedly at $25/share; the offer was worth approximately $2.4bn overall and brought the price up from an autumn dip down below $15/share. 

Subsequently, ZIM’s Board had reportedly hired Evercore to look into “strategic options”. The stock saw some positive action on the NYSE, as rumours emerged of a potential bid, albeit at a preliminary stage, by Deutsche Börse-listed Hapag-Lloyd. But market participants and shareholders were expressing caution amidst concerns regarding the composition of Hapag-Lloyd’s shareholder base. 

Analysts at Jefferies, with a team led by Omar Nokta, commented that: “…A transaction seems difficult to achieve given the Israeli Special State share which exists to safeguard ZIM’s existence as an Israeli entity and to ensure its fleet availability for national security purposes. HLAG has several major holders including Qatari Holdings with 12.3% and Saudi Arabia‘s Public Investment Fund with 10.2%, that could make a transaction difficult to achieve.”

Nokta’s team has been closely following the action at ZIM and analysing the multiple alternatives for the company. Jefferies issued a report noting that ZIM will be holding a special shareholder meeting and voting on a proposed director slate in late December, commenting that: “This vote has implications for what’s ahead of ZIM, and we would expect ZIM’s Board to finalise any strategic shift following this meeting.”

Sometimes, the best option is to avoid deviating from a working strategy and do nothing; thus not further diminishing the roster of listed entities. In its detailed analysis, the Jefferies analysts offered that the best of multiple alternatives would be “… staying the course as a public company, and retaining its high cash balance.” 

Recent figures evidence ZIM’s success, showing the liner company’s liquidity at around $3bn. In its memo, with Jefferies putting a “hold” on the shares, and a target of $20/share,  they said: “ZIM’s $3bn of cash and give it much flexibility to maintain its market footprint while providing a solid cushion in a period of significant uncertainty ahead for the industry.”