Wednesday, June 14, 2017

Hunter Maritime Capesize acquisition deal flops

It is very surprising that a shipping acquisition deal promoted by the Saverys SPAC, Hunter Maritime and a major NY investment bank, Morgan Stanley would fall flat on its face with investors.  Saverys is a well-known and regarded figure in shipping circles.  Morgan Stanley is a major Wall Street investment bank that has done a lot of  high profile shipping deals.  What went wrong???

This deal was for the purchase of the 175,000-dwt Charlotte Selmer and Greta Selmer (built 2011), the 175,000-dwt Tom Selmer (built 2011), and the 175,000-dwt Lene Selmer and Hugo Selmer (both built 2010). They were all built by Chinese shipyard New Times Shipbuilding.  It was a pure asset deal, not the purchase of a going concern company.  

The originally announced price tag of US$ 139,4 million was higher than the US$ 123 million market valuation.  Eventually the price was reduced to US$ 133.5 million, still a rather hefty premium.   The deal hinged on completing a tender offer to buy back 8.2 million of its Class A common shares, roughly half of the shares sold to the public last year, at $10 per share.  Too many shares were tendered.  

Several knowledgeable sources explained that Investors hated this proposed deal.  Normally to induce SPAC investors to stay and recycle the investor base to de-SPAC, there has to be an acceptable arbitrage over the nominal US$ 10 share value.  The share buyback, moreover, was at par and gave shareholder nothing from it. The deal was poorly put together: small for a US$ 150 mio raise.  Even worse arbitrage and in a sub-sections that traded at a discount of P/Nav!!!  

Morgan Stanley is not considered by the Street a SPAC bank.  They appear to have fallen flat on their faces, unable to help Saverys/ Hunter recycle the shares nor assist in structuring the deal properly to be workable with shareholders in term of the share arbitrage. Why was Morgan Stanley not on the ball here???

Hunter has a 24-month deadline from its public offering last November to find potential acquisitions or return capital to its shareholders. The company said it is still looking for potential acquisitions.

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