Analyst Poe Fratt of Alliance Global Partners has been trying to read the tea leaves around investor-base tumult at Connecticut’s Eagle Bulk Shipping, and the more things change, the more he seems to value a steady hand on the tiller.
And even with two public shipowners now in for nearly one-third of the company, Fratt sees a takeover as unlikely and stability of leadership as Eagle Bulk’s best bet.
The decision by top holder Danaos Corp of Greece with a 16.7% to change its status from a passive to an activist investor in a filing last week has not changed that take.
Fratt is still mostly a fan of Eagle Bulk’s decision to buy back Oaktree Capital Management’s 28% stake in the company and to slide an anti-takeover “poison pill” into its bylaws.
“No change on our initial read that pros of the buyback and poison-pill adoption appear to outweigh cons, especially in light of the second major shareholder emerging on June 30,” Fratt said, referring to Castor Maritime’s revelation of a 14.99% stake in Eagle Bulk.
“Please note that there are some grey areas and there are likely to be surprises in this dynamic situation, but we believe that the current management has built a solid track record, and board/management continuity is the best path forward.”
Fratt does not expect Greece’s Danaos or Cyprus-based Castor to launch a takeover bid, but he said a counteroffer from a “white knight” or friendly investor could emerge if he is mistaken.
The Alliance Global note emerged after the change in Danaos’ filing status. John Coustas-led Danaos simultaneously pledged cooperation with Eagle Bulk’s leadership while saying its operations “have significant room for improvement”.
Danaos did not go into detail about what areas it finds lacking. However, one area to watch may be Eagle Bulk’s transition to an “active management” model for its fleet under the leadership of chief executive Gary Vogel in recent years.
Eagle Bulk has consistently claimed an earnings premium to relative to the Baltic Exchange’s dry indices in recent years. But management also has talked about its work in building a global chartering and trading infrastructure that has delivered better returns.
The cost of the internal staff build-up could become a target of further public complaints from Danaos, while Eagle Bulk is likely to counter that earnings outperformance does not come for free.
Alliance Global is maintaining a “buy” rating on the stock with a $75 price target. The share was trading just over $45 on Monday, down more than 2% on the day.
