The stock of Connecticut-based Eagle Bulk Shipping climbed above the $51 mark in the first hour of trading on the New York Stock Exchange on Tuesday as investors digested the company’s all-stock acquisition by Greece’s Star Bulk Carriers.
The gain of more than 11% was to be expected as holders moved the share toward the $52.60 per share price Star has agreed to pay the Gary Vogel-led company to consummate its latest piece of dry bulk consolidation.
The deal was struck on the basis of each company’s net asset value, which allowed Star to offer a premium over where Eagle’s shares had been trading.
Jefferies analyst Omar Nokta observed that the combination “gives EGLE a valuation bump given SBLK’s shares are valued at 0.9 times NAV while EGLE’s were priced at 0.75 times pre-announcement”, referring to Eagle by its stock symbol EGLE and Star by SBLK.
The researcher added: “Assuming EGLE shares trade up to SBLK’s valuation, the upside in the near term is to $55.”
Jefferies has delivered an overall positive view of the transaction, which creates shipping’s largest dry bulk company.
“We believe the deal makes sense for both parties as it continues SBLK’s long-term track record of consolidation while it gives EGLE an opportunity to thrive under a larger platform,” Nokta wrote.
“The transaction terms are fair in our view, though given the all-stock nature of the deal, there is the potential for a competing cash offer. However, we would not expect a materially higher offer than the current one given it is based on NAV.”
Star shares logged more modest gains with a 2% lift above the $20 mark in early Tuesday trading.
Eagle’s gains pushed the stock into the black for the year, topping the $50.35 price at which it started trading in January.
The share has been sluggish for most of 2023, falling as low as $40.57 on 30 October.
The combined company is to boast a fleet of 169 bulkers and a market capitalisation of around $2.1bn.
While Eagle’s exact valuation in the deal is still murky, it is estimated the Greek company is paying about $500m on a shares basis.
Under the terms of the deal, each holder of an Eagle share will receive 2.6211 Star shares, with the $52.60 price paid a 17% premium to Eagle’s closing price of $44.85 per share on Friday.
Star holders will control about 71% of the combined company and Eagle the remaining 29%. The combined company will continue to be known as Star Bulk Carriers.
