George Economou is paying about 21% below net asset value (NAV) to buy back the remaining shares in New York-listed DryShips and take the company private, a new filing suggests.
The estimate comes from New York investment bank Evercore Partners, which was hired by a special committee of DryShips directors as advisors in the transaction.
Fair price
Evercore has opined that the $5.25 price is fair based on a few measures that go beyond simply evaluating NAV.
Evercore’s measure of the offer price to NAV is somewhat more favourable than a calculation by TradeWinds, which on 22 August reported that Economou appeared to be paying about a 33% discount.
However, both analyses point out that Economou’s bid appears to be in line with fair value, considering that most listed shipowners are trading at fairly large discounts to NAV.
Special vote
Evercore’s breakdown is included in a publicly filed proxy statement prepared in advance of a 9 October special shareholder vote on the offer from Economou’s privately held SPII Holdings.
It sets NAV at $6.67 per share, although Evercore also cites a lower range of $5.63 to $6.24 if factoring in a $50m cost to DryShips for the early termination of management contracts with private Economou entities.
Evercore’s analysis of 14 other New York-listed tanker and bulker companies shows that at the time of the study they were trading at an average of 77% of NAV for tanker companies and 73% for bulker owners.
DryShips owns both types of tonnage in addition to offshore vessels.
Improved offer
Economou’s offer price of $5.25 represents a 66% premium to the stock’s closing price at the time the acquisition was announced on 12 June, and a 37% premium to the 16 August closing before the Greek owner’s improved offer was announced.
Economou’s revised offer was 21% higher than his original bid of $4 per share.
Evercore also analysed the offer on the basis of discounted cash flow and multiples to Ebitda and found ranges below the $5.25 per share offer.
SPII will acquire the 14.5 million DryShips shares it does not already own. Prior to commencing the offer, SPII owned 72.4 million shares or 83.35% of DryShips.
Evercore was paid $2m for its services, the filing indicates.
The investment bank had not earned fees from DryShips or SPII in the two years prior to the agreement.
But it has earned between $5m and $10m each from Ocean Rig, an Economou company in the offshore drilling segment, and Danaos Corp, the containership company in which Economou holds a stake larger than 10%.
