Stolt-Nielsen could soon spin-off its tanker fleet with an initial public offering at a time when the owner is looking for further consolidation.
A listing for Stolt Tankers would follow a familiar path for Oslo-listed parent Stolt, which floated its VLGC interest when Avance Gas went public in 2014.
DNB Markets analysts led by Nicolay Dyvik say a spin-off or listing of Stolt Tankers could happen “sooner rather than later”.
Stolt took over Jo Tankers chemical fleet in a $575m deal last summer, a transaction that left the listed company at its self-imposed covenant limit of debt to tangible net worth of 1.5:1, the DNB analysts wrote in a report.
Better off alone?
Dyvik and colleagues Petter Haugen and Jorgen Lian value the owner’s tanker fleet, spanning 85 fully owned and 39 part-owned vessels, at $2.7bn.
Net of allocated debt, this represents an equity value of NOK 121 per share, the DNB team said.
The idea of Stolt separating its tanker division has been around for some time and resurfaced in February when the owner said an independent chemical division would be best placed to continue consolidation efforts.
Analysts believe a stand-alone Stolt Tankers would be in a better position for consolidation and growth.
Are you afraid?
Niels Stolt-Nielsen, chief executive of the company, wrote in its annual report on Friday: “The time for consolidation in the parcel tanker industry is ripe.”
He added: “We have, over the years, worked on finding partners to merge or pool with but we have not succeeded.
“I suspect the other players don’t like us. Or maybe they are afraid of us?”
Supporting Stolt’s consolidation interest is the belief that several non-traditional owners will look to exit the market.
“I know several who are now realising how operationally challenging our particular industry is and that a quick flip of their position is not as easy as they originally envisaged,” Stolt-Nielsen wrote in the annual report.
“With a large orderbook, and what I predict will be a deflationary economy, savings through operational synergies created by consolidation is, I predict, the way to go. We will continue to seek opportunities.”
Good quarter expected
Stolt will report its first quarter accounts on Thursday this week.
Analysts are projecting a net profit of $17m for the three months to the end of February, with DNB forecasting a higher figure of $21m.
In a message to shareholders on Friday, the chief executive said: “While it was a good quarter overall, the business environment remains challenging.
“We will continue to manage our businesses intelligently and conservatively, and to capitalise on growth opportunities that may arise”
He said the difficult economic challenges of today stemmed from too much capacity in areas ranging from commodities to shipping, created by the unrealistic expectation that rapid demand growth would continue indefinitely.
Conflicts and hot spots
“We in the developed countries have been living beyond our means,” Stolt-Nielsen said. “We have borrowed to consume as nations and as individuals.
“As private individuals, we have had to deleverage and still, eight years since the financial crisis, with few exceptions, most nations have not been able to create a budget surplus.”
Historically, the shipowner argues, economic conditions like today have only been resolved by war.
“The global tension caused by extended economic stagnation often leads to conflict and the demand for war materiel, combined with the destruction of war, absorbs excess supply,” he said. “With so many hotspots around the world, I pray it does not come to war this time round.”
