MPC Container Ships (MPCC) has agreed to acquire Songa Container through a share purchase agreement worth $210m.
The deal represents a major consolidation between European boxship tonnage providers in a boiling hot charter market.
Constantin Baack, chief executive of Oslo-listed, Hamburg-managed MPCC said the acquisition was backed by the company’s strong belief in sustainable container market fundamentals and its desire to take advantage of the significant lag between asset values and rates.
The deal, which is expected to be completed by the end of July, will see Songa’s fleet of 11 containerships that have an average capacity of 2,250 teu come under the control of MPCC, giving it a total fleet strength of 75 vessels with a total capacity of 158,000 teu.
Clarksons Platou Securities analyst Frode Morkedal said the average nine-month charter backlog of the Songa Container fleet is "positive given today's record strong market environment".
"We conclude that the transaction is accretive, and we lift 2021 and 2022 earnings per share estimates by 4%," he added.
According to a statement released by MPCC late on Tuesday night, the transaction is being undertaken on a debt and cash free basis, with the assumption of Songa having completed the sale of the 2,564-teu City of HongKong (built 2009), 3,534-teu Songa Haydn (built 2010) and 1,794-teu FS Ipanema (built 2009).
TradeWinds reported the sale of the City of HongKong and Songa Haydn for a combined $58m in May. The deal netted the company a $39m profit. Swiss liner giant MSC subsequently emerged as the buyer of the Songa Haydn and City of HongKong.
MPCC’s deal to acquire Songa requires about $115m of the purchase price be settled in cash. The amount includes the refinancing of outstanding debt.
DNB Bank has committed to provide a $127.5m acquisition facility with a two-year tenor and effective interest rate of 500 basis points plus Libor for the cash consideration.
The remaining portion will be settled by way of issuing about 48m to 50m new shares in MPCC to Songa’s shareholders.
These shares will be of the same class as MPCC's ordinary shares and will be listed on the Oslo bourse, and subject to a customary lock-up agreement for a period of three months from completion of the transaction.
"We are pleased to welcome renowned shareholders like Arne Blystad, Canomaro Shipping and Klaveness Marine to MPCC,” Baack said
“This is a milestone transaction for MPCC and we are particularly excited about the cash flow prospects of the combined fleet which will come to the benefit of our existing and new shareholders in the coming years.
“The structure of the transaction creates an immediate and accretive impact to our earnings in a container market that continues to strengthen by the day," he added.
Strong market fundamentals
MPCC said the acquisition of Songa aimed to reinforce its position as “the leading intra-regional container tonnage provider” as it would add significant scale and operating leverage to its platform in a “persistently strong container market, with rates, charter durations and asset values strengthening on a continuous basis”.
Arne Blystad, chairman of Songa Container, noted that the container market continues to be strong.
"MPCC has become a compelling reflection of the underlying container market fundamentals," he said.
"We are happy to contribute to the consolidation in the container market and build a leader in the regional container segment. Prior to this transaction we were already a shareholder in MPCC and we will become a more significant one post this transaction."
The Songa fleet has an estimated Ebitda backlog of S22.5m with an average charter length of about nine months.
On a pro forma basis, MPCC currently expects revenues for the combined fleet in the range of $290m to $315m for the 2021 financial year, with Ebitda in the range of $170m to $180m.
Based on the combined charter portfolio and assuming charter renewals at around current market rates and periods, MPCC said its fleet was positioned to potentially generate an Ebitda of above $350m during 2022, with $70m to $75m of this generated by the Songa fleet.
DNB Markets acted as lead advisor for MPCC and Songa Container on the transaction, while Clarksons Platou Securities and Fearnley Securities acted as joint merger-and-aquistions advisors to MPCC.
Norwegian law firm Advokatfirmaet Thommessen acted as legal deal counsel.
Gary Dixon contributed to this story.
