International Seaways has made official its $2.2bn all-stock acquisition of US neighbour Diamond S Shipping amid expectations it will reap the benefits of an eventual turnaround in a depressed tanker market.
Lois Zabrocky-led Seaways announced on Friday that the deal had closed as anticipated, with Seaways shareholders controlling about 55.75% of the combined company and Diamond S backers 44.25%.
The coming together of Manhattan-headquartered Seaways and Diamond, located just up Interstate 95 in Greenwich, Connecticut, had been more than a year in the making with on-and-off discussions through Covid-plagued 2020.
With a combined fleet of 102 tankers once three VLCC newbuildings have been delivered, Seaways will move forward as the second-largest US-listed tanker owner by vessel count and third-largest as measured by deadweight tonnes.
The Seaways management team led by Zabrocky and chief financial officer Jeffrey Pribor will steer the enlarged company, while Diamond S chief executive Craig H Stevenson Jr takes a board seat and a $500,000 contract to advise Zabrocky for six months.
Diamond S was formerly chaired by legendary investor Wilbur Ross, who divested his interest upon being named US commerce secretary under former US president Donald Trump.
"We are pleased to complete this transformational and highly accretive transaction, solidifying our position as a diversified tanker sector bellwether," Zabrocky said.
"With enhanced scale, financial strength and commercial expertise, we have markedly strengthened our position to capitalize on favorable long-term industry fundamentals in both the crude and product markets."
One question surrounding the merger is just how long it will take for those long-term fundamentals to kick in, as tanker owners continue to slog through a market trough that has extended from the middle of 2020.
At least one analyst offering a quick reaction to the closing is able to see the better times ahead.
Liam Burke of B Riley Securities continued a "buy" rating on Seaways and a $35 price target. The owner was below $17 per share in Friday trading on the New York Stock Exchange.
"The merger occurs at the bottom of the shipping cycle and the company should drive strong operating leverage in a recovering rate environment that we would anticipate later in 2021. With tanker asset values rising, International Seaways also has opportunistically added valuable fleet assets," Burke told clients on Friday.
Zabrocky addressed the transition on Friday in a message to the staff of the combined company.
"I am proud to say that, as of this morning, we are all Team Seaways," she wrote.
"This organization is well positioned in large crude and clean product 'power alleys' to take advantage of the coming market upturn. We will be ready to do this for all of the reasons I outlined to our new colleagues on Monday – most simply put, we work hard, and we work together."
The new Seaways fleet will include 13 VLCCs, 15 suezmaxes, five aframaxes/LR2s, 13 panamaxes/LR1s, 48 MR product tankers and six handy tankers. Through joint ventures, it has ownership interests in two FSO service vessels.
Seaways also announced on Friday that one of its directors, private equity veteran Ty Wallach, had stepped aside to help make room for Diamond S additions to the expanded board.
Diamond S representatives will include Stevenson, former WL Ross & Co executive Nadim Qureshi and independent director Alexandra "Kate" Blankenship as the board grows to 10 from eight.