“The money is important, but it is the personalities we remember,” says Merrick Rayner, the veteran shipbroker at EA Gibson.
“Success or failure in shipping is down to timing, and this remains as significant today as ever.”
Fortunes have been made and lost on single cheques, and the past year has provided more proof of that. John Fredriksen and Nicolas Saverys joined up in a $2.3bn LNG venture. Andi Case and Peter Anker cooked up the largest deal in Clarkson’s history as it merged with RS Platou. And Peter Georgiopolous evoked memories of his deal-mongering past with a $1.4bn swoop involving Navig8 Crude.
All eye-catching deals. But more time needs to pass before they can be measured against the landmark transactions of the past 25 years...
June 1996: Fredriksen buys Frontline to begin a legacy
John Fredriksen did not get off to the best of starts in 1996. In February the 147,000-dwt Sea Empress (built 1992) crashed onto the rocks off Milford Haven, southwest Wales, and Fredriksen was in the headlines for all the wrong reasons.
But before the end of June the Norwegian magnate had completed a swoop that would prove to be the springboard for an empire. It took Fredriksen around $50m to buy a controlling stake in Swedish OBO owner Frontline, his first public company.
He rolled six of his own tankers into Frontline in exchange for stock, creating a company with assets worth $1bn.
“Fredriksen had so-so ships and Frontline’s ships were not that impressive,” recalls one renowned S&P broker. “It was like two one-legged men getting together — they were in a much better situation when they did. Fredriksen had bought cleverly but this took him to the next stage.”
Fredriksen was worth an estimated NOK3bn ($369m) when he bought Frontline. Today, many deals and a host of public companies later, “Big John” has amassed a fortune of more than $11bn to become one of the richest men in the world.
A distressed takeover of Fred Cheng’s Golden Ocean in 2000 and the formation of Seadrill involved larger numbers — and the ICB battle with John Angelicoussis more drama — but the Frontline deal was the launch pad for a legacy.
December 2000/January 2001: Ofer buys capesize cash cows from P&O
“That was the biggest scoop ever,” says one renowned shipping deal maker of Sammy Ofer’s swoop for the Associated Bulk Carriers (ABC) capesize fleet of 22 ships.
Ofer handed a $98m cheque to P&O chief executive Lord Sterling for a 50% share in the bulkers over Christmas 2000, to begin a joint venture in which Zodiac Maritime had commercial management of the vessels. The ships later traded for some time in the Capesize International Pool before Zodiac ultimately took a 100% holding and assumed management of the fleet.
The initial deal came about a few months after P&O had walked away from an Oslo IPO for the fleet because it could not get the value it wanted. The legendary Ofer fought off competition from Marc Saverys for the ABC fleet amid the belief that the capesize market was set for an upturn in the next two or three years. What followed was the best bull market ever seen, with individual capesizes being sold for vastly more than Zodiac’s initial purchase price.
Reflecting on the deal today, Sammy’s son, Zodiac chairman Eyal Ofer, explains: “In the depressed market we took a risk. Zodiac increased its exposure to the spot cape market through the purchase of the P&O ABC fleet. We were fortunate with our timing.”
A top London broker comments: “It was certainly one of the best deals of the last 30 years. Sammy instinctively knew the best time to buy and also understood the benefits in economies of scale and how to ratchet it up. It would have taken incredible effort to have replicated that with individual purchases. At the bottom of the market you are not the only ones who know that ships are cheap.”
April 2003: Sohmen-Pao breaks Norwegian hearts at Bygdoy
“A sad day for Norway” ran a headline in TradeWinds in a week that saw the country’s largest shipping company, Bergesen, snapped up by World-Wide of Hong Kong.
The sale of the nation’s “family silver” caused ripples around the shipping world, while catapulting the Sohmen family back into the big time. “I think old man [Sigval] Bergesen would be turning in his grave realising his legacy is about to become history, with no trace to be found in Norway,” Per Heidenreich, the Norwegian who then ran Connecticut-based Heidenreich Marine, told an Intertanko conference in the US.
“It’s sad for the Norwegian community,” said Basil Mavroleon, managing partner of Charles R Weber, at the same event. “Not in that it’s the Sohmens, because they’re great. But Bergesen is a company we all grew up with.”
World-Wide’s Helmut Sohmen and his son Andreas Sohmen-Pao were already the largest shareholders in Bergesen when they made their move in April 2003. The family had turned down the opportunity to buy Bergesen six months previously when it was offered to them by Petter Sundt and Morten Bergesen, and it took Sohmen-Pao less than two hours to strike the final deal at Morten’s villa at Bygdoy, Oslo.
World-Wide took its fleet from 43 ships to 130, reviving memories of the late 1970s, when Sir YK Pao had more than 200 ships. The Bergesen coup also took it into the LNG market after many years of trying.
Despite fears at the time, the takeover marked the start of a special relationship for the Singapore-headquartered company with Oslo, where today it has extensive operations, two listed companies and is expected to float a third.
April 2007: Teekay and Torm share the OMI fleet
OMI executives Craig H Stevenson and Robert Bugbee were riding the greatest bull market of all time when they received a call from Teekay deal maker Peter Evensen. Perella Weinberg Partners and Fearnley Fonds were quickly engaged and the executive dream team that had taken OMI from a $1.50-per-share company sold it to Teekay and Torm for $2.2bn.
The Canadian and Danish owners shared out seven suezmaxes and 34 products tankers, while Bugbee and some friends from OMI headed off to work for hedge fund Ospraie Management.
Rates fizzed for a year after the deal and sellers’ remorse was in the air for a short time, but history would smile on only one side of the transaction.
“Torm was reckless, as it basically bankrupted their company, but I don’t think you can say it was a great deal for Teekay,” one source comments.
For OMI, however, the sale was a stroke of genius. “Shipowners tend not to sell out at the top of the market, as shipping for so many people, particularly the Greeks, is a way of life. Who else sold at the top? Not many,” says Rayner.
Others offer some sympathy for the buyers in what was a champagne period.
“We can all laugh and say that was a stupid move for Teekay or Torm, but there are so many different forces in the market that are encouraging you to do these types of deals. As the market goes up, it’s very hard to say no,” one source observes.
Bugbee made use of his hedge fund days to make key connections, before returning as a top executive with Wall Street giant Scorpio Tankers.
Stevenson now fronts Diamond S Shipping, which has an eye on buying Overseas Shipholding Group, and Evensen has not lost his appetite, with Teekay companies involved in three tanker fleet deals in the past six months.
January 2014: Euronav’s star rises with Maersk deal
Paddy Rodgers made multiple trips to New York in 2013 on a mission to recapitalise Euronav. Instead, the visits ended up sowing the seeds for a deal that reinvented the company: its $980m capture of 15 VLCCs from Maersk Tankers.
On his first visit in the summer Rodgers was preaching a story of a crude market shaping up for recovery, but potential private equity investors were more interested in the products tanker market.
When he returned later in the year the crude market was tracking the Euronav script and the funds delivered cash to cover bonds due in 2015. Euronav was also approached to buy a tanker fleet, lining up $500m in bank debt for the deal. “We started that negotiation, but did not like the look of the fleet we were going to acquire,” Rodgers recalls. “It was too diverse for our skills set.”
However, when it emerged that Peter Georgiopolous had failed to buy the Maersk fleet within an exclusive period, the earlier negotiations meant Euronav “already had a straw man up”.
In a whirlwind few days Euronav staff were dispatched to Copenhagen to ensure Maersk was free to do a deal, while Rodgers and chief finance officer Hugo De Stoop confirmed the bank debt was still available and started talking with private equity about a further $500m.
“On the Tuesday evening we decided we would go for it, and on the Thursday night we flew back. On the Friday morning three banks had confirmed they would support the debt side and we already had two equity funds saying, subject to due diligence, they wanted to do the deal,” Rodgers says.
After a weekend discussion with directors, it was agreed that Rodgers was to pay $10m for a two-month exclusivity period. When the money only got him from 22 December to 3 January he jokes that he “felt a bit like Jack and the beanstalk, in that I had taken the cow to market and came back with 10 beans rather than any gold”.
“But it was the only alternative and therefore Christmas had to be cancelled,” adds Rodgers, who has had a strong relationship with Maersk since the formation of the Tankers International pool. He could afford to smile on 5 January when the deal was confirmed.
“It was a very bold purchase,” says one legendary broker. “It was very difficult to see upside at the time because the market was crap. It is quite difficult to get on the right side of a deal with AP Moller, as they are smart people — that is why this transaction is so impressive.”
Euronav hasn’t looked back, going on to become the largest crude tanker owner on Wall Street after its January 2015 IPO.
