Global Ship Lease stock has remained rooted around its 52-week low after it announced plans to merge with George Youroukos-led Poseidon Containers Holding this week.
Shares in the shipowner were down by close to 8% on Wednesday and were trading just $0.07 above its one-year low of $0.80 each at the time of writing on Wednesday.
GSL’s London-based chief executive Ian Webber told TradeWinds it was difficult to speculate on the reasons for the slump.
He described the $780m deal, which will form a company with 38 small and medium sized containerships, as “transformative".
“It’s a great deal for GSL,” he said. “We’re doubling the size of the fleet.
"We’re reducing the average age of the fleet by three years. We’re adding nine modern eco-wide-beam fuel efficient vessels to the fleet.”
The deal fulfills a goal of Greek owner George Youroukos, who has long been seeking a public-listed vehicle for his container operations.
He pulled an IPO for Poseidon in 2015 and to plans to merge with Aristides Pittas-led Euroseas were aborted earlier this year.
Sources believe Youroukos has moved towards the public market to accommodate his private-equity partner Kelso & Co, with whom he teamed up in 2010.
It enables Youroukos “to raise money from the stock exchange and allow his investors to come and go as they please", says one financial source.
The deal leaves 69.5% of a merged company in the hands of Poseidon and its investors, but Webber dismissed the idea it is a takeover.
He said there were room on an enlarged board of eight directors where he remains as chief and Youroukos as executive chairman.
“There are complementary skill sets being combined here. GSL’s legacy continued to be a significant part of the enlarged entity," Webber added.
The merger also significantly reduces the 45% stake held by CMA CGM in GSL, which spun the company off with a New York Listing in August 2008.
CMA CGM is relegated the second largest shareholder with 13.3%, after Kelso & Co with 56.4%.
The French liner operator remain the charterer of 17 of 38 vessels in the GSL fleet.
Webber argues that the diversified shareholding “strengthens the balance sheet and increase our ability to invest in new tonnage".
That is helped by a $65m loan obtained in September from Hayfin Capital Management and Breakwater Capital, of which more than $57m remained.
“The facility remains available to us and we want to make sure we put that to good use by expanding assets at the bottom of the cycle,” he said.
Webber added that mid-size and small ships, where GSL plans to focus its investments, are less exposed to the impact of trade and tariff wars between the US and China.
The merger turns GSL into the 13 th largest non-operating containership owner, putting it on a par with the likes of MPC Group, the Schulte Group, and Navios Group, according to Alphaliner.
“Strategically the deal makes sense for both parties, but the liquidity of the stock is still going to be extremely low,” said one financial source.
But he believes it will nevertheless be difficult for private-equity investors to the sell their stock.
Such a sale would not take place anyway for six months due to a lock-in clause during which shares cannot be traded, says Webber.
