Hygo Energy Transition and its bankers were one day away from pricing their New York initial public offering on 23 September when a bomb exploded in the middle of the process — figuratively.
First reports surfaced in the local Brazilian press that chief executive Eduardo Navarro Antonello was under investigation by federal authorities on suspicion of bribery in connection with work nine years ago at previous employer Seadrill.
The $450m IPO had all but completed its investor book and was likely to price at the bottom of, or slightly below, its intended $18 to $21 price range, according to one source familiar with the deal.
But even a below-range pricing would have come at an attractive valuation, while boosting the fortunes of sponsor Golar LNG, which is led by Tor Olav Troim.
Instead, organisers decided to postpone on 24 September — the day pricing was to happen — with prospects now uncertain when or whether the deal will be revived.
It was not the first time a bomb exploded a shipping IPO. An earlier case, stretching back 15 years, was more literal.
TradeWinds reported exclusively in May 2005 that an intended $275m flotation by Greek owner Aries Maritime Transport had been thrown into disarray over problems confronting its original chief executive, Harry Petrakakos.
Petrakakos had been blamed by a London High Court judge for blowing up his own ship in an insurance-fraud scheme, forcing deal sponsors to replace him.
A second IPO from a Greek owner ran into trouble over management entanglements later that year.
That was Aegean Marine Petroleum, which had publicly disclosed various skirmishes with Greek legal authorities by chief executive Dimitris Melissanidis in IPO documents.
New questions about Melissanidis surfaced during the marketing process that caused investors to baulk, and the deal was postponed.
Eve of the deal
In the end, both of the 2005 IPOs eventually got done after sponsors inserted new men at the top. But neither were on the eve of an actual deal pricing when the problems surfaced, as happened with Hygo.
Major shareholder Mons Bolin stepped in as Aries chief executive. Aegean tapped prominent shipowner Peter Georgiopoulos — who at the time was a darling of the US capital markets — as chairman and 25% shareholder.
For Hygo, a similar pivot in corporate leadership may be the key element in reviving the IPO, finance sources said this week.
“I think what they need is a fresh, unimpeachable face to be brought in from the outside to head Hygo, someone with no current connection to the operation,” one finance source said this week.
While Antonello is suspected of paying $40m in bribes to oil company executives to secure a $2.7bn contract for Seadrill, he has not been charged by Brazilian authorities and has denied any wrongdoing.
But he stepped down from the chief executive role on Tuesday last week, saying he would defend himself in the case during a leave of absence.
Hygo representatives told outsiders shortly after the deal was pulled that they hoped to revive it before the end of the year.
That is probably not likely given that IPO activity in the US usually finishes by early to mid-December as investors take a break for the holiday season.
“I don’t see that time frame as particularly realistic,” one finance source said. “If it does come back, it will likely have to be without Antonello and, more realistically, it would be sometime in the first half of 2021.”
Some question whether Troim could step into the chief executive’s seat to boost a revived offering. But since Troim himself was a key executive in Seadrill from 2005 to 2014, others argue that this might not help matters.
“He was very active at Seadrill when these things allegedly happened,” one finance veteran said, arguing the case for an outsider.
“That might only produce a scenario of ‘what did he know and when did he know it?’”
On the question of who knew what when, this also applies to those running the Hygo IPO.
Background checks
Lead underwriters Morgan Stanley and Goldman Sachs are among the biggest blue-chip names in investment banking.
An investigative firm such as Kroll Associates is typically employed by lawyers for the underwriters to conduct a background investigation into company officers.
Were the questions surrounding Antonello’s past missed?
One source who has been briefed on events says this is not the case. He said those running the Hygo IPO knew of the background but were convinced the allegations had no basis in fact “and that the situation had become dormant”.
That all changed when Brazilian federal police executed 25 search-and-seizure warrants only hours before the deal’s intended pricing in connection with the marathon Operation Car Wash probe, which began in 2014. And the time bomb went off.
