Saltchuk Resources is backing off its pursuit of Overseas Shipholding Group (OSG).
In regulatory filings made on Tuesday night, the Seattle-based investor said it told the Jones Act tanker player that it was suspending discussions on a take-private offer valuing the company at approximately $261m.
"Saltchuk Holdings has notified [OSG] that, in light of continued uncertainty with respect to the pace and trajectory of the global pandemic recovery and its effects on [OSG's] business and operations, Saltchuk Holdings is suspending discussions with the Issuer regarding a possible acquisition of its outstanding common stock," the filing read in part.
OSG has been approached for comment. Its New York Stock Exchange-listed shares dropped $0.52 to $2.19 around lunchtime.
Saltchuk Resources owns 15.2m OSG shares, or 17.4% of the company through Saltchuk Holdings.
The company, which controls TOTE Maritime and Tropical Shipping alongside air cargo, energy and logistics holdings, began building its stake in OSG in March 2020 with speculation picking up quickly that it would lead to a takeover bid.
In July 2021, it formally made its non-binding bid to acquire the rest of the shares for $3 each, an offer described at the time by investor and analyst J Mintzmyer as "borderline insulting".
The Covid-19 pandemic has crippled oil demand, holding down tanker rates for both product and crude carriers worldwide as fewer people travel.
While largely thought of as operating in the protected Jones Act trade, OSG has reported customers have capitalised on abysmally low product tanker rates by purchasing European cargoes rather than employing US-flagged tankers.
Only US-flagged ships can carry cargoes between two points in the country, according to the Jones Act.
The company said it had just 625 revenue days for its Jones Act handysize tankers in the first quarter versus 1,144 revenue days for the same period last year. In the second quarter, the numbers were similar, with 637 revenue days versus 1,177 in 2020.
For the second quarter, chief executive Sam Norton said rate improvement had been slower than expected, but that the quarter offered evidence of "improving fundamentals".
The optimism was shared by American Shipping, an Oslo-listed company that charters its fleet to OSG, insisting that US refinery activity had picked up and that asset prices remained strong.
In the filing, Saltchuk said it would continue to review its investment in OSG and that it could take an active role in the company.
Saltchuk remains OSG's second-largest shareholder behind Cyrus Capital Partners, which owns 23.8% of the company, or 20.7m shares.
OSG had signed a non-disclosure agreement with Cyrus in June ahead of Saltchuk's takeover bid, allowing it to review certain sensitive documents to evaluate its investment in the company.
