(SINGAPORE) Six months of talk finally gave way to a concrete step yesterday as Neptune Orient Lines (NOL) submitted a bid to acquire Hamburg-based Hapag-Lloyd. If successful, this move will create the world's third-largest container carrier and cement Singapore's shipping-hub status.

However, the deal is far from done. For one thing, NOL could be facing its old nemesis, Norway's richest man John Fredriksen who is leading a shareholder revolt against TUI AG selling off Hapag-Lloyd.

Reports said that the proposed deal values Hapag-Lloyd, currently the world's fifth-largest shipping line, at an estimated US$7 billion - setting the stage for one of the largest acquisitions undertaken by a Temasek company. Temasek owns 66 per cent of NOL which ranks number eight.

NOL fell 2.2 per cent, the most in a week, to $3.15 yesterday, while the broader Singapore market ended down one per cent.

An NOL statement after market closed confirmed that it has submitted an indicative non-binding bid to acquire Hapag-Lloyd which is a wholly owned unit of TUI AG, one of the leading European travel and shipping groups.

'A completed transaction would result in the integration of NOL's container shipping business APL with Hapag-Lloyd,' NOL said.

'The combination would create the world's third-largest container carrier. It is at this stage premature to state whether the indicative non-binding bid will lead to a definitive transaction. Any agreement would be subject to, among other steps, due diligence, acceptance of final bid, regulatory approvals and NOL shareholders' approvals.'

NOL spokesman Paul Barrett said he had nothing further to add to the statement.

Some analysts have said the price tag looked expensive given the uncertain economic outlook.

But one said it is a strategic move for Singapore, and NOL would not want to miss this opportunity like before.

'If Singapore wants to maintain its position as a shipping hub, it can't wait while other players combine. Otherwise you can get marginalised,' the analyst said.

NOL had missed out in 2005 when AP Moeller-Maersk bought Royal P&O Nedlloyd, becoming number one.

That acquisition was said to have dismayed NOL management which saw the balance of power shifting.

In 2002, NOL's then chief executive Flemming Jacobs had let on that P&O Nedlloyd would be a good target if the opportunity arose. But NOL was then swimming in red ink, and an acquisition would likely have meant fund raising which some minority shareholders did not like.

NOL posted losses of US$57 million and US$330 million in 2001 and 2002 as a result of global overcapacity which drove down rates.

Then, in 2004, Temasek surprised the market when it raised its stake in NOL from about 30.4 per cent to 66 per cent through a takeover offer in what observers saw was to facilitate a bid for P&O Nedlloyd. It was around then that the shadow of Mr Fredriksen first crossed its path.

Market watchers had speculated that Temasek's move at the time was a pre-emptive strike amid fears that Mr Fredriksen and others were quietly enlarging their stakes in NOL.

Mr Fredriksen was understood to be among the top five or six largest shareholders in NOL at the time and was variously reported to hold a stake of between 4 and 9 per cent.

Obstacles NOL faces this round in bagging Hapag-Lloyd could be from competing bids, and also opposition from Mr Fredriksen.

TUI AG chief executive Michael Frenzel in May said its preference is to sell Hapag-Lloyd to concentrate on tourism, but has yet to convince all its shareholders on the merits of the divestment.

While Dr Frenzel had emphasised TUI's preference is to divest Hapag-Lloyd, he said the firm did 'not rule out any of the potential options, although our clear preference is a divestment solution'.

Divestment, according to him, is fastest to implement and offers the opportunity to realise a strategic premium.

But reports have said that Mr Fredriksen has tripled his stake in TUI this year to around 15 per cent - accumulating shares since the acquisition talk began.

He is leading a shareholder revolt against the company's management and has also called for Dr Frenzel's resignation.

Hapag-Lloyd has 141 container ships with a total capacity of 493,000 TEUs and employs more than 8,000 people worldwide.

Deutsche Bank is acting for TUI which has said that it will make an initial evaluation of bids by mid-August.