April 18, 2014 9:00 AM, EDT
Hapag-Lloyd, CSAV Sign Merger Agreement
Patrick T. Fallon/Bloomberg News

Germany-based ocean carrier Hapag-Lloyd said it has signed a binding agreement to merge with Chilean counterpart Cia. Sud Americana de Vapores to form the world’s fourth-largest container shipping company.

Both companies have approved the merger, but the transaction is still subject to approval from competition authorities, Hapag-Lloyd said in an announcement.

The ocean carriers announced in January that they had signed a non-binding memorandum of understanding as they pursued the merger.

The two are combining to compete on more equal terms with industry leader A.P. Moeller-Maersk A/S after an oversupply of vessels coincided with slowing demand to produce a prolonged slump in container shipping. The global financial crisis slowed trade and caused the worst decline in prices for carrying cargo since containerization became global in the 1970s.

Following the merger, the new Hapag-Lloyd will operate about 200 vessels with total capacity of about 1 million twenty-foot equivalent units, an annual transport volume of 7.5 million TEU and a combined turnover of 9 billion euros, the company said.

Its headquarters will remain in Hamburg, Germany, but the company will maintain a regional office in Chile for its business in Latin America.

As part of the agreement, CSAV will become one of Hapag-Lloyd’s “core” shareholders with an initial 30% stake in the combined company, the company said.