Hapag-Lloyd AG is buying Israel’s Zim Integrated Shipping Services Ltd as the German shipping company aims to grow in size and bolster its presence in Asia.

The agreement for a cash deal at $35 a share, which is subject to regulatory approvals in Israel, values Zim at around $4.2 billion, Hapag-Lloyd said Monday.

The purchase price represents a 58% premium over Zim’s stock at the close of market February 13, the target said in a statement. As part of the deal, Hapag-Lloyd has a separate pact with Israeli financial investor FIMI Opportunity Funds, which will see the creation of an entity owning 16 of Zim’s ships, serving key trading routes into Israel. 

Hapag-Lloyd shares fell as much as 9% in Frankfurt, extending losses after confirmation of the agreement. U.S.-traded Zim closed up 4.8% on February 13 with markets closed February 16 for Presidents’ Day. The Hamburg-based shipper over the weekend had said it was nearing a deal.

There’s been increased consolidation pressure in the industry due to a slump in freight rates from the lucrative pandemic years, when carriers ordered a record number of ships to meet demand. Both Hapag-Lloyd and Zim have reported shrinking profits recently.

Haifa-based Zim operates 145 ships including 130 container vessels and 15 vehicle transport vessels, according to official reports. The company says it operates a “charter-intensive fleet model” or “asset-light” approach, meaning many of their vessels are leased rather than owned.

The Israeli government regards Zim as a strategic asset and holds a golden share in the company, granting it control over strategic matters, including ownership. This makes FIMI’s involvement critical to any deal, as relevant government ministries seeking to maintain open shipping lines to Israel in times of emergency — such as during war — will want to avoid full foreign ownership of Zim.

While Hapag-Lloyd counts Kuehne Holding AG and CSAV Germany Container as its major shareholders, Qatar Holding LLC, controlled by the Qatari royal family, and Public Investment Fund, controlled by Saudi Arabia’s crown prince, hold significant stakes. 

Israel has accused Qatar of supporting Gaza-based Hamas, designated a terror group by the U.S. and many other countries. FIMI is separately bound to an Essential Interests Order by the Israeli government, which also grants it special oversight rights, for its stake in the defense manufacturer Ashot Ashkelon.

The transaction is expected to close by the end of 2026, subject to approvals.