Excel Maritime Carriers Ltd agreed to buy larger rival Quintana Maritime Ltd for US$2.45 billion, including debt, to more than triple its fleet size, which carries commodities including ore and coal.
Excel will pay US$13 in cash and 0.4084 share for each Quintana share. That equals about US$26.48 a share based on Monday's closing price, Hamilton, Bermuda-based Excel said in a statement on Tuesday. The price is 57 per cent above Quintana's close on Monday.
Excel chairman Gabriel Panayotides said the purchase puts Excel 'another step closer' to his 'vision of creating a truly global full-service dry-bulk carrier.' Quintana operates 29 ships and is awaiting delivery of eight more over the next two years, which will increase its fleet capacity by 55 per cent.
'From a strategic standpoint, we like it,' said Doug Mavrinac, a Houston-based Jeffries & Co analyst who has a 'buy' rating on both companies. 'It increases the size of Excel's fleet significantly, lowers its average age, and it increases time-charter coverage.'
The age of Excel's fleet will fall to an average age of 8.2 years from 12.9 years. Newer ships tend to win higher shipping, or time-charter, rates. Total capacity will increase to 3.7 million deadweight tons from 1.07 million deadweight tons.
The 13-member Bloomberg Dry Ships Index was down 26 per cent so far this year, because of a decline in shipping rates.
The purchase will make the combined entity the fourth-largest Panamax- size carrier company in the world, according to Lloyd's Register-Fairplay. Panamax carriers usually haul 75,000-ton cargoes. Quintana had US$626 million in debt as of Sept 30.
Quintana specialises in long-term charters while Excel has booked more on the spot market with short-term contracts. Quintana said last year its fleet was 90 per cent booked for 2008, 80 per cent in 2009 and 70 per cent in 2010. Quintana's customers include BHP Billiton plc, the world's biggest mining company, and Cargill, the largest US agricultural company.
The addition of Quintana's eight Capesize-class ships, which will be delivered over the next couple of years, will 'serve as the growth engine of the company,' Stamatis Molaris, Quintana's chief executive, said. Mr Molaris will become CEO of the combined company.
Bulk-shipping rates have slumped 49 per cent from a record in November amid delays in annual price talks between Chinese steelmakers and iron-ore producers and concern that the US and Chinese economies are slowing. Dry-bulk companies have benefited by strong commodity demand from China and India, among other countries.
The Baltic Dry Index, an overall measure of commodity-shipping costs on different routes and ship sizes, has fallen 37 per cent this year and was down 1.4 per cent on Tuesday.
The purchase could trigger other acquisitions within the industry, Mr Mavrinac said. 'You can see continued consolidation,' he said. 'More of the consolidation may be public companies buying private assets.'
The acquisition has been agreed to by the boards of both companies. Excel said the total value of the transaction was US$2.45 billion, which includes Quintana debt. The purchase could close in the second quarter.
'This is a highly attractive offer for Quintana,' Quintana's Mr Molaris said. Excel secured US$1.4 billion in financing for the purchase.
Natasha Boyden, a Cantor Fitzgerald analyst, said in a note to investors that the acquisition price was 'reasonable' for Quintana's assets, though she had concerns the purchase involved too much debt. She has a 'buy' rating on Excel and a 'hold' on Quintana.
Iron ore supplies slumped after Cia Vale do Rio Doce, the world's biggest producer, and Rio Tinto Group, the second-largest exporter, said shipments were disrupted. Panamax rates have fallen 31 per cent this year alone.
Quintana in October said it hired financial advisers, suggesting it may put itself up for sale. On Jan 8, TradeWinds magazine reported the company accepted a US$27 per share offer from Excel.
The US$26.48 a share purchase price would be changed if the average closing price of Excel shares exceeds US$45 a share in the 15 trading days prior to the acquisition's completion, Excel said.
The combined company will operate 55 ships, with almost 5.2 million tons of dead-weight tonnage.
Excel will pay US$13 in cash and 0.4084 share for each Quintana share. That equals about US$26.48 a share based on Monday's closing price, Hamilton, Bermuda-based Excel said in a statement on Tuesday. The price is 57 per cent above Quintana's close on Monday.
Excel chairman Gabriel Panayotides said the purchase puts Excel 'another step closer' to his 'vision of creating a truly global full-service dry-bulk carrier.' Quintana operates 29 ships and is awaiting delivery of eight more over the next two years, which will increase its fleet capacity by 55 per cent.
'From a strategic standpoint, we like it,' said Doug Mavrinac, a Houston-based Jeffries & Co analyst who has a 'buy' rating on both companies. 'It increases the size of Excel's fleet significantly, lowers its average age, and it increases time-charter coverage.'
The age of Excel's fleet will fall to an average age of 8.2 years from 12.9 years. Newer ships tend to win higher shipping, or time-charter, rates. Total capacity will increase to 3.7 million deadweight tons from 1.07 million deadweight tons.
The 13-member Bloomberg Dry Ships Index was down 26 per cent so far this year, because of a decline in shipping rates.
The purchase will make the combined entity the fourth-largest Panamax- size carrier company in the world, according to Lloyd's Register-Fairplay. Panamax carriers usually haul 75,000-ton cargoes. Quintana had US$626 million in debt as of Sept 30.
Quintana specialises in long-term charters while Excel has booked more on the spot market with short-term contracts. Quintana said last year its fleet was 90 per cent booked for 2008, 80 per cent in 2009 and 70 per cent in 2010. Quintana's customers include BHP Billiton plc, the world's biggest mining company, and Cargill, the largest US agricultural company.
The addition of Quintana's eight Capesize-class ships, which will be delivered over the next couple of years, will 'serve as the growth engine of the company,' Stamatis Molaris, Quintana's chief executive, said. Mr Molaris will become CEO of the combined company.
Bulk-shipping rates have slumped 49 per cent from a record in November amid delays in annual price talks between Chinese steelmakers and iron-ore producers and concern that the US and Chinese economies are slowing. Dry-bulk companies have benefited by strong commodity demand from China and India, among other countries.
The Baltic Dry Index, an overall measure of commodity-shipping costs on different routes and ship sizes, has fallen 37 per cent this year and was down 1.4 per cent on Tuesday.
The purchase could trigger other acquisitions within the industry, Mr Mavrinac said. 'You can see continued consolidation,' he said. 'More of the consolidation may be public companies buying private assets.'
The acquisition has been agreed to by the boards of both companies. Excel said the total value of the transaction was US$2.45 billion, which includes Quintana debt. The purchase could close in the second quarter.
'This is a highly attractive offer for Quintana,' Quintana's Mr Molaris said. Excel secured US$1.4 billion in financing for the purchase.
Natasha Boyden, a Cantor Fitzgerald analyst, said in a note to investors that the acquisition price was 'reasonable' for Quintana's assets, though she had concerns the purchase involved too much debt. She has a 'buy' rating on Excel and a 'hold' on Quintana.
Iron ore supplies slumped after Cia Vale do Rio Doce, the world's biggest producer, and Rio Tinto Group, the second-largest exporter, said shipments were disrupted. Panamax rates have fallen 31 per cent this year alone.
Quintana in October said it hired financial advisers, suggesting it may put itself up for sale. On Jan 8, TradeWinds magazine reported the company accepted a US$27 per share offer from Excel.
The US$26.48 a share purchase price would be changed if the average closing price of Excel shares exceeds US$45 a share in the 15 trading days prior to the acquisition's completion, Excel said.
The combined company will operate 55 ships, with almost 5.2 million tons of dead-weight tonnage.