Angeliki Frangou's Navios Maritime Partners is taking over financially challenged Navios Maritime Acquisition in a stock-for-stock deal that will create the largest US-listed shipowner by vessel count.
The combination creates a 143-ship goliath with a presence in bulkers, containerships and tankers, a fleet worth an estimated $4.2bn and a combined market capitalisation of some $822m based on current share prices.
The takeover also rescues 45-tanker Navios Acquisition from the pending maturity of ship mortgage bonds in November, which had caused the owner to issue a warning about its ability to continue as a going concern in June.
In the minutes after the merger announcement at close of trading in New York, Navios Acquisition shares shot up 44% to $3.03, while Navios Partners fell 6% to $24.15.
Navios Partners is stepping up to take out $397.5m in ship mortgage notes at par, injecting $150m in cash in exchange for 44.1m Navios Acquisition shares, plus $290m in new secured debt financing from European banks. The redemption is effective on 25 September.
Frangou, the Navios group chairwoman and chief executive, confirmed in an interview with TradeWinds that the merger signals a move away from the so-called "pure play" ownership model — once pitched by investment bankers — to a diversified ownership framework.
The combined company will feature 55 bulkers, 43 containerships and 45 tankers once all newbuildings have been delivered.
"We're going from specialised companies to a company that's transformative not only because of its scale, but its presence in different operating sectors," Frangou said.
"We've created more of an all-around company. The focus on pure plays in capital markets resulted in over-specialisation."
That meant companies that were not just focused on dry bulk, for example, but even sub-sectors of dry bulk.
"We've seen what happens when that sector or sub-sector doesn't work and you can't provide investors with long-term returns. Now we see more companies like a Norden or a Costamare taking in dry bulk vessels — you are able to mitigate the weakness of one particular operating sector," she said.
Along those lines, Navios Partners posted record first-half landmark results in bulkers and boxships, while Navios Acquisition suffered along with the broader tanker market.
Navios Partners is pitching the takeover as a trough-level acquisition of a fleet in a sector that is about to recover as demand comes back from Covid-19, although Frangou said she would hesitate to speculate on precisely when that rebound would begin.
Navios Acquisition shareholders are getting 0.1275 of a Navios Partners common unit for each of their shares, which equates to about 11% of the combined company. That translates to an implied value of $3.40 per share — a 65% premium to Tuesday's closing price of $2.06 and an 18% premium to the average price over 60 days.
The combined leverage of the two companies will be modest at 36%, Navios said, with a large collateral base available for refinancing debt maturities.
Frangou has come under recent criticism for decisions involving vessel purchases and at-the-market share issuances at Navios Partners.
Activist investor Ned Sherwood, chief investment officer of 5.8% holder MRMP-Managers, also has poked at the complex entanglements among the various Navios companies, warning Frangou "not to correct issues at her other holdings by making illogical and uneconomic decisions to the detriment of Navios Partners".
Frangou declined to directly address the MRMP attack or to predict Sherwood's reaction to the Navios Acquisition deal, but did speak more generally about her priorities.
"The company has an obligation to all its stakeholders. We're trying to do something that will make sense to them," she said.
Frangou noted that some were sceptical when Navios Partners announced in early January that it would acquire Navios Maritime Containers in an all-shares deal.
Since then, the share price has appreciated 300% and boxship values have staged similar growth, she said. She drew a parallel to the current trough values of tankers.
"There is a rationale that you are buying an attractive fleet, a nice fleet, at lower values, but with an upside that is coming," she said.
The combination was approved by special committees of each company's board, with Jefferies and S Goldman Advisors acting as financial counsellors to Navios Partners and Pareto Securities to the Navios Acquisition committee.
The merger is subject to majority approval of Navios Acquisition shareholders, who are controlled 64.2% by Navios Partners. Closing is expected in the fourth quarter.
