A takeover offer from Greece’s Star Bulk Carriers that looked compelling from the outset has grown more attractive since the terms were set in December.
And that gives equity analysts at Clarksons Securities even more confidence that shareholders of Connecticut’s Eagle Bulk Shipping will approve what is now an $836m acquisition come a 5 April vote.
The deal has become even better because while the exchange ratio of the all-stock deal has remained fixed, Star’s fleet has increased in value more than Eagle’s since the agreement was announced, analysts led by Frode Morkedal said in a client note on Monday.
The divergence has to do with Star owning larger ships, researchers said.
“The fleet of Star Bulk predominantly comprises larger dry bulk carriers [capesize and panamax vessels]. Since the announcement of the merger, the value of these larger vessels has increased at a faster rate than that of the smaller vessels owned by Eagle Bulk,” Morkedal wrote.
“This should mean that the attractiveness of the deal has increased in the eyes of Eagle shareholders.”
Star’s fleet of 115 vessels includes 17 newcastlemaxes, 17 capesize units, two “mini-capesizes,” seven post-panamaxes, 44 kamsarmaxes, two panamaxes, 18 ultramaxes and eight supramaxes.
Eagle’s fleet is entirely within the midsize sector, as it brings 52 ultramaxes and supramaxes to the transaction.
The combined 167-ship fleet would create the largest listed bulker company under Clarksons’ coverage both in terms of fleet size and market capitalisation.
Terms of the takeover were worked out based on the net asset value of both companies. The parties established that the owner of one Eagle share would receive 2.62 Star shares in return.
But because of Star’s relative gain in fleet value, the current NAV ratio would be about 7% lower, implying each Eagle holder should receive 2.44 shares. Nonetheless, the ratio remains fixed at 2.62.
“Eagle shareholders have been further incentivised to vote in favour of the transaction,” Clarksons concludes.
The new implied price Star is paying for each Eagle share is $76 — only $1 short of Clarksons’ estimation of the Gary Vogel-led owner’s NAV. With just over 11m Eagle shares outstanding, the implied price Star is paying for the company is $836m.
Upon conclusion of the deal, Eagle stakeholders would own 29% of the new company, which will continue to be called Star Bulk Carriers and run by Star management. Vogel will depart the company upon the closing of the transaction.
Clarksons calculates a NAV of $31 per share for the combined company.
Star shares were trading around $24.50 in New York on Monday, down less than 1% on the day.
Eagle’s stock was just above $64, also down less than 1%.
