Saltchuk Resources’ $950m deal to buy Overseas Shipholding Group is seen as a diversification move that adds a new fiefdom to the US maritime conglomerate’s growing empire.
The Seattle company already has a wide portfolio in domestic and regional shipping, including container and ro-ro vessels, tug and offshore service vessels, and a fuel and lubricants business.
But Tampa-based OSG offers it something it does not have: the largest fleet of tankers and articulated tug barges (ATBs) operating in the booming market protected by the US Jones Act.
As TradeWinds reported earlier on Monday, New York-listed OSG has agreed a takeover at $8.50 per share, which gives OSG an equity value of $653m.
David St Amand, whose Navigistics Consulting authors an influential report on the Jones Act tanker market, said the transaction will have little impact on that market because Saltchuk has had no presence there until now.
“OSG is purely a diversification within the Jones Act for them,” St Amand said, acknowledging that Saltchuk is a client.
The consultant estimates that OSG’s fleet makes up 23% of the market of Jones Act product tankers and ATBs of 142,000 barrels or more in the Lower 48 trade, as the contiguous states of the US mainland are known.
That makes OSG the largest player in that market, at least until Seacor Holdings and Crowley complete their Fairwater Holdings joint venture, which will have 28%.
And it’s a booming trade, with only one ATB available in the spot market.
“Other than that, everything is term-chartered up or COA-covered,” St Amand said, referring to contracts of affreightment. “It’s a very strong market right now.”
He said the market has been propped up by tanker supply constraint, with shipowners refraining from building US-built vessels that qualify for the Jones Act, and added demand for renewable diesel trade from the US Gulf Coast to other parts of the country.
Created in 1982 when eight investors came together to buy Totem Ocean Trailer Express, Saltchuk boasts consolidated annual revenue of $5bn and 7,500 employees. The families of four of the original investors remain Saltchuk partners, according to the company website.
Saltchuk chairman Mark Tabbutt said: “OSG, our nation’s leading domestic marine transporter of energy, has a strong cultural fit with Saltchuk and shares our commitment to operational safety, reliability and environmental stewardship.
“We look forward to welcoming more than 1,000 members of the OSG team to our family of companies and growing the enterprise through multi-generational investments.”
In a January letter to OSG’s board, Tabbutt touted the advantages of being a private company in shipping markets.
“By its nature, shipping has multi-decade investment cycles and shorter-term economic cycles, both of which are better supported by a privately held family business versus being traded in the public markets,” he wrote.
“Saltchuk has the benefit of having significant experience and great confidence in the future of the Jones Act and the benefits it provides our country. In fact, over the last 20 years, Saltchuk has invested well over a billion dollars in new Jones Act vessels.”
The company’s portfolio of companies includes TOTE, which operates two container ships in the domestic trade to Puerto Rico, as well as two ro-ros on the route between Alaska and the US West Coast.
It is also the parent of TOTE Services, a ship manager and government contractor.
The Saltchuk marine services company includes several tug and barge companies, such as Foss Maritime, Foss Offshore Wind, Young Brothers and Cook Inlet Tug & Barge.
Saltchuk also controls NorthStar Energy, a fuel and lubricants company focused on Hawaii and Alaska.
The OSG deal is the biggest merger-and-acquisition deal for Saltchuk since it purchased Tropical Shipping from AGL Resources in 2014.
Florida-based Tropical operates container ships and ro-ros in trades to the Bahamas and Caribbean.
