News of a Potential Management Buyout of ZIM Integrated Shipping Services

ZIM is an Israeli international container-carrying shipping company who are quoted on the New York Stock Exchange. Founded in 1945, they are currently going through a period where there are reports of a buyout, which management could take charge of the company privately. In early August, shares on the New York Exchange went up dramatically amid news that these efforts could materialise.

ZIM offers a range of services, including container transportation, with a focus on major trade routes and select markets. It has aims to entertain a commitment to ESG (Environment, Social and Governance) values and is an asset-light company that sees its future in a digital age as something that it should pursue with vim and vigour. With International Shipping a stable and well-balanced industry, companies like ZIM will provide shipping jobs in many different areas for some considerable time to come. The future, according to their share price recently, which went up from $15.49 on a Friday night to $18.29 during the first hour of trading on Monday, is looking buoyant.

After the early flurry of activity on their stocks, during this time, they closed somewhere in the region of 15% up for the day. Jefferies, the US Investment bank, was early to report the potential takeover in a research note, specifically saying that Israeli business news outlet Calcalist had reported the possibility.

ZIM chief executive Eli Glickman is involved in the possible deal, potentially teaming up with Israeli shipping magnate, Abraham Unger. Financially, the deal involves an assumed share price of $20, which brings the value of the company to $2.4 billion. Unger is a leading light in the car carrier industry, and it is no delicate assumption that our demands for motorised transport is hardly going to go down in the future. The report points to a merger between Unger’s company with ZIM to make an even more diverse shipping company.

However, there are some notes of caution. Jefferies' lead shipping analyst adopted a less than outright positive tone when he said that the transaction could be difficult to complete, with a view that investors are likely to ask for a higher premium to join forces.

Some rumours had come to light in March about the pending takeover, and ZIM management then were none too keen to confirm or deny the potential for any merger, saying they don’t wish to comment on any market rumours.

Omar Nokta, Jefferies' head shipping analyst, said the difficulties in making the takeover watertight would depend on a tender offer for every share that would require 95% acceptance, whilst, furthermore, Israeli government approval would also be required for the merger proposal to be accepted.

ZIM shares have been traded at a relatively low multiple since it went public in 2021. Its cash balance has always been good, amounting to $3.42 billion on the balance sheet. After the payment of a dividend, the value of the company remains high with a share value at $24.50.

This makes for a cheap evaluation when you compare the share price with the trading level on the Exchange. Jefferies have said investors may therefore look at its earnings and dividend track record to demand a higher premium than that being purported today.