CPLP to spin off its crude and product tanker business and merge it with DSS Holdings L.P.’s business and operations
Capital Product Partners L.P. (NASDAQ: CPLP) (“CPLP”) and DSS Holdings L.P. (“DSS”), a privately held company and one of the world’s largest owners and operators of medium-range product and Suezmax crude tankers, have entered into a definitive transaction agreement pursuant to which CPLP has agreed to spin off its crude and product tanker business into a separate publicly listed company, which will merge with DSS’ businesses and operations in a share-for-share transaction, CPLP said in a press release.
The new company, to be called Diamond S Shipping Inc., will be a market leader in the crude and product tanker markets, benefitting from a balanced and large-scale portfolio of vessels, strong management leadership and a cost-efficient commercial platform. The transaction reflects DSS’ strategic initiatives to access public markets with enhanced scale at a cyclically opportune time to create one of the world’s largest shipping companies well positioned for future industry consolidation. The new company is expected to be listed on the New York Stock Exchange and will be headquartered in Greenwich, Connecticut.
This transaction represents a strategic step for CPLP to unlock unitholder value by combining its tanker business with a highly regarded pure-play tanker company. CPLP intends to continue as a master limited partnership (“MLP”), with a modern fleet under medium- to long-term charters producing stable cash flows in the container sector complemented by one drybulk vessel. CPLP expects to be well positioned going forward to engage in asset acquisitions across different shipping segments with the aim of growing its per unit distributable cash flow.
The transaction is valued on an NAV-to-NAV basis with CPLP receiving $23 million in consideration in the form of approximately 3% incremental ownership in Diamond S Shipping Inc. related to certain transaction benefits including access to public markets and enhanced scale. The transaction results in CPLP unitholders initially owning approximately 33% and DSS equity owners initially owning approximately 67% of the new company (all ownership percentages are subject to closing adjustments). CPLP unitholders also will continue to own their CPLP units. CPLP intends to effect a reverse unit split promptly after the closing of the transaction.
About Diamond S Shipping Inc. and the Transaction
Diamond S Shipping Inc.’s asset portfolio will consist of the combined product and crude tanker fleet of CPLP and DSS, totaling 68 high-quality tankers, with an average age of 7.8 years, including 52 product tankers and 16 crude tankers, positioning the new public company to capitalize on the improving fundamentals in the tanker market on a greater scale.
Diamond S Shipping Inc. is expected to be the third largest publicly traded product tanker operator and the fifth largest public tanker company worldwide.
The new company is expected to be well capitalized, with post-close net debt to fleet value of approximately 60% and total liquidity in excess of $90 million.
The new company will be led by DSS’ management team, which has an established track record of growth and successful commercial operations.
Diamond S Shipping Inc.’s Board and Management
Craig Stevenson, Jr., CEO of DSS, will serve as the CEO of Diamond S Shipping Inc. Mr. Stevenson has over 40 years of experience in the shipping industry and previously served as the Chairman and the Chief Executive Officer of OMI, a NYSE-listed tanker company. The Diamond S management team will continue to serve in senior management positions.
The new company’s board of directors will consist of seven members, a majority of whom are expected to be independent. DSS will initially nominate three board members, Nadim Qureshi, who will serve as the Chairman, Hal Malone, and Kate Blankenship, and CPLP will initially nominate two board members, Jerry Kalogiratos and Gerry Ventouris. The board of directors will further include Mr. Stevenson and Bart Veldhuizen.
Diamond S Shipping Inc. will combine the technical expertise of Capital Ship Management Corp., the current manager of CPLP’s fleet, and the cost effective operating structure of DSS. Capital Ship Management Corp. will continue to provide commercial and technical management for the crude and product tankers contributed by CPLP to Diamond S Shipping Inc.
Mr. Stevenson commented:
“Our organization is pleased to create with CPLP one of the world’s largest public company tanker operators. This transaction will occur at an opportunistic time in the cycle and creates one of the largest, highest quality fleets and best capitalized public shipping companies in the market. We are confident that this unique combination will create significant shareholder value through the cycle by using our cash flow to invest in the business via acquisitions and returning capital back to our shareholders. We look forward to leveraging CPLP’s outstanding expertise and industry reputation as we work to grow the business together.”