Activist investor Ned Sherwood has weighed in on Navios Maritime Partners' all-stock acquisition of Navios Maritime Acquisition, and the result is another broadside aimed at the governance practices of Navios principal Angeliki Frangou.
And although the main target of Sherwood's barbs is not the merger itself — the investor admits he could be better off for it — the man behind MRMP Managers does say Navios Maritime Acquisition could have been bought for less money.
Sherwood is unrelenting in accusing Frangou of manipulating her public companies to achieve maximum benefit for her private management companies, which derive various commissions and fees for serving the listed shipowners.
Frangou also prioritises the interests of the general partner (GP) in the structure, Navios Partners, over the various limited partnership (LP) constituents like his company, he charges.
"We believe that in most partnerships, the GP and LP interests are aligned; however, that is not the case in 'Angeliki-land'. In the 'Angeliki-land' we find ourselves in today, the focus seems to be on acquiring more ships, and not creating more value for the limited partners," Sherwood wrote on Friday in an open letter to the Navios board.
"More ships in all likelihood means Angeliki’s private ship management company reaps more buy and sell commissions and higher management fees, while NMM’s LPs are left with a greater discount to book value. In other words, more ships are not better when NMM trades at a discount to net asset value," Sherwood charged, using the ticker symbol for Navios Partners.
Frangou said in a recent interview with TradeWinds about the acquisition that she would not respond to criticisms from individual investors.
"The company has an obligation to all its stakeholders. We're trying to do something that will make sense to them," she said at the time.
Apparently there is little about recent events that makes sense to Sherwood, who is based in Connecticut and Florida. This includes the Navios Maritime Acquisition buy, which he called a "shotgun acquisition" that bails out the acquired company from $397m in debt maturing in November.
"In our opinion, [Navios Acquisition] was in a liquidity bind and could have been acquired for approximately $50m less than the stated purchase price given its desperate financial situation; however, for Angeliki’s empire that would not have been good," Sherwood charges.
He added: "With regard to the [Navios Acquisition] acquisition, we are not sure whether we are better or worse off — only time and tanker rates will tell."
Frangou has pitched the deal as a countercyclical play on a recovering tanker market at a bargain price for Navios Partners, creating the largest US-listed shipowner by vessel count.
Sherwood said that Navios Partners stock sales through an at-the-market equity programme and further dilution created by the Navios Acquisition takeover have reduced MRMP Managers' stake to 4.4% of the company from 5.8% at last reporting.
MRMP has not sold any shares in the interim, Sherwood said.
"Notwithstanding what we see as Angeliki’s dictatorial and self-serving antics, the booming dry bulk and container markets augur well for [Navios Partners'] continued success given its expected massive increases in cash flow," Sherwood wrote.
"However, we believe the replacement of Angeliki as GP by virtually any other shipping company would lead to an even greater appreciation for [Navios Partners] LP interests."
