A perennial complaint about shipping stocks is that there are way too many of them and they’re way too small. If only there were just a handful of large-cap consolidated shipowners in each category — tankers, dry bulk, containers, gas — not a hodgepodge of micro-caps.
The good news for ‘bigger and fewer’ proponents is that the number of shipping stocks is indeed shrinking. There has been only one shipping IPO in the last six years compared to numerous delistings.
The bad news is that the remaining public players are not necessarily bigger on average than before. Mergers between public companies that create larger fleets are being outpaced by take-private deals that cull other larger-cap public owners from the mix.
Speakers at this week’s annual Capital Link New York Maritime Forum addressed what’s driving the take-private wave and prospects for shipping IPOs.
M&A
Consolidation is one way to reduce the number of shipping stocks.
Container-ship and bulker owner Navios Partners (NYSE: NMM) completed its takeover of related-party tanker owner Navios Acquisition (NYSE: NNA) on Friday. This followed earlier intra-group takeovers of Navios Containers by Navios Partners in April and Navios Midstream by Navios Acquisition in December 2018. The Navios family circle has now shrunk from five to two.
In addition, tanker owner International Seaways (NYSE: INSW) completed its purchase of Diamond S Shipping in July. Recent M&A chatter has turned to Euronav (NYSE: EURN), given the purchase of almost 10% of its shares by shipping magnate John Fredriksen, founder of Frontline (NYSE: FRO).
Take-private transactions
Take-private deals are far more prevalent than takeovers by public shipping companies.
The first big public departure was DryShips, taken private by founder George Economou in August 2019. Such transactions surged this year.
Teekay LNG (NYSE: TGP) announced on Oct. 4 that it will be acquired by infrastructure fund Stonepeak for $6.2 billion (including equity and debt obligations). GasLog Ltd. was bought by a BlackRock infrastructure fund in June and delisted. Mixed-fleet owner Seacor was taken private by American Industrial Partners in April. Container-equipment lessor CAI International was bought by Japan’s Mitsubishi HC Capital last month.
The trend goes beyond U.S.-listed shipping stocks. Oslo-listed Hoegh LNG Ltd. was acquired and taken private by the Hoegh family and a Morgan Stanley infrastructure fund in June. Oslo-listed Ocean Yield, which owns a diversified fleet, is in the process of being taken over by private equity giant KKR.
Other shipping stock departures
Most public shipping departures in the previous decade were due to business failures. There have been no recent shipping bankruptcies because balance sheets have been strengthened by prior restructurings, most segments are enjoying strong rates, and owners in the one segment that isn’t — tankers — have cash cushions from 2020 rate spikes.
Still, there are other ways to lose shipping names besides M&A, privatizations and insolvencies.
Golar LNG Partners was sold to New Fortress Energy (NYSE: NFE) in April; while the buyer is publicly listed, the stock is outside of the shipping space.
Scorpio Bulkers announced last year that it would sell its entire dry bulk fleet and go into the wind-farm installation business, renaming itself Eneti (NYSE: NETI). It sold its final bulkers in July.
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As shipping prospects rise, field of shipping stocks shrinks
