Alexander & Baldwin spins off Matson

   Alexander & Baldwin has announced plans to split into two firms—one that will concentrate on shipping and logistics; the other on real estate and agriculture.
   Under the plan announced Thursday afternoon, Matson, which is the leading carrier to Hawaii and Guam, will become a separate company. The new firm will also include Matson Logistics, and Matson’s services to Micronesia and China.
   Matthew J. Cox, the current Matson president will become chief executive officer of the new Matson, and Walter Dods, the current A&B chairman will be chairman of the new Matson.
   The company’s real estate and agriculture businesses will retain the Alexander & Baldwin name, and Stanley M. Kuriyama, A&B’s current chief executive officer will become both chairman and chief executive officer of the new real estate and agriculture company.
   Kuriyama said there will be no interruption in operations or service, and “no net job loss as a result of the separation.”
   Matson is well positioned in the markets it currently serves, and we are excited about its growth prospects and future value creation opportunities as an independent company,” said Cox. “Matson’s valuable assets, strong balance sheet, and premium brand and service model position us to seek expansion into other markets.“
   Each of the corporations will have its own independent board of directors, with industry-specific expertise. And the company also announced that it was appointing retired Admiral Thomas B. Fargo, former commander of the U.S. Pacific Command to the A&B and Matson boards “to further enhance the maritime expertise of the board.”
   “I think it will be great for Matson eventually, because they will have a board of directors that understands shipping and logistics,” said Brad Dechter, president of the NVOCC and logistics company DHX. “Matson does an outstanding job and it might make the job of Matson management a lot easier now that they will be a pure transportation company.”

Cox

   Dechter said that Matson is the leading carrier to Hawaii and estimated its market share has ranged from about 68-72 percent compared to Horizon Lines’ 28-32 percent.
   The announcement gave Michael N. Hansen, the president of the Hawaii Shippers Council, pause. He thought it was “probably a reflection of their disappointment with the failed operations of Matson’s foreign flag containership service in the transpacific trade.”
   Matson added a second string transpacific string last year between the U.S. West Coast and Asia, but when demand and prices in the trade dropped, pulled it less than a year later. When it was discontinued, Matson said the service had recorded operating losses of about $50 million.
   But a Matson spokesman said the decision to split the company was a result of much longer thinking, not related to the lack of success with the second transpacific string. (Matson continues to operate another transpacific string, the eastbound leg of a service that also calls Hawaii and Guam westbound.)
   Hansen, who is an advocate for eliminating the “build-American” requirement for ships in the Hawaii trade, is also worried that the Matson spin-off “may very well reflect their view of how unsustainable the potential costs of fleet renewal in U.S. shipyards would be for Matson going forward.”
   But Cox said Matson is “looking to expand to niche services in other Pacific Island trades, and to leverage our strategically located terminals and logistics capabilities to take advantage of the growing international trade and domestic movement of goods. We never lose sight, however, of the fact that Hawaii and Guam are our core markets, and we remain committed to providing our customers there with the highest quality, most reliable shipping service in the world.”
    Upon the completion of a tax-free separation, shareholders would receive one share of both Alexander & Baldwin and Matson stock for each share of stock they currently own. The separation is expected to be completed in the second half of 2012.
    Alexander & Baldwin has been an investor in Matson since 1908, and gradually increased its stake until 1969 when Matson became a wholly-owned subsidiary. It said each of the two operations were  now large enough to independently establish strategic priorities, growth strategies and financial objectives, and allocate capital in a manner that is best tailored to each business. The board and management of each company will be focused on their own business.
    The company also cited these advantages:

• Each company will appeal to a more focused shareholder base that is attracted to the particular business profile of the company and the specific industries in which it operates. 
• Each company will have its own separate stock, which can be used to facilitate acquisition opportunities. 
• The proposed separation will allow for greater transparency into financial and operating performance.
• Each company expects to attract additional research coverage by industry-specific investment analysts.

– Chris Dupin