The news follows hard on the heels of CMA CGM and Mediterranean Shipping Company's operational link-up announced Dec 2 and reflects the need to consolidate and more effectively deploy the excess tonnage currently afloat on the world's oceans. While neither announcement deals explicitly with capacity rationalisation, both talk to the requirement for more effective and coordinated management of the global liner fleet.

We believe that this rumoured purchase is likely to face the same headwinds as the company's last attempt: namely, the synergies that would make sense of the acquisition will prove elusive, with headquarters and jobs preserved in Hamburg. NOL has the firepower to make this acquisition (cash of US$365m as at Sep 23, US$1bn of an unutilised MTN programme and significant undrawn lines from credit providers), but the " devil" would likely lie in the details of any sale & purchase agreement. We maintain BUY NOL and our 12-month target price of S$1.50 based on 1.0x P/B.