The same cast of characters has been in tanker circles for years. If their company goes bust, they pop up somewhere else. Sometimes they fight with each other. Sometimes they cooperate. Occasionally, they sell their entire fleets to one another (and re-emerge after their non-competes expire).
One such rare fleet deal was announced Wednesday morning: New York-based International Seaways (NYSE: INSW) will merge with Connecticut-based Diamond S Shipping (NYSE: DSSI) in an all-stock transaction, with International Seaways the surviving entity. INSW’s shares closed up 5.6% on the news, Diamond S shares 4.5%.
INSW CEO Lois Zabrocky and CFO Jeff Pribor will run the combined company, INSW shareholders will own 55.75% of the stock and get a $1.10-per-share special dividend, and INSW will hold seven of 10 board seats. Diamond S shareholders will own 44.25% and get three board seats, including one for the company’s outgoing CEO, Craig Stevenson.
Post-merger, INSW will have an implied market capitalization of around $1 billion and own 100 tankers with a total capacity of 11.3 million deadweight tons (DWT). Crude tankers will make up 71% of DWT, product tankers 29%.
It will be the third largest U.S.-listed tanker owner measured in tonnage, behind Euronav (NYSE: EURN) and Frontline (NYSE: FRO).
“It will be a very, very large company and clearly size is important,” said Stevenson on Wednesday’s conference call with analysts. “Anyone who knows me, and the other positions I’ve had in the industry, knows that I think consolidation is something that needs to be front and center.”
Putting together a ‘three-way deal’
Diamond S sought to go public via an IPO in 2014 but failed. It finally listed through a merger with the tanker fleet of Evangelos Marinakis’ Capital Product Partners (NASDAQ: CPLP) in early 2019.
Capital Product Partners retained its container-ship fleet and remained listed. Its 25 tankers, together with Diamond S’s, were listed separately under the Diamond S ticker.
In return, Marinakis obtained a large stake in the new Diamond S — 6.9% as of the latest securities filing — and his private entity, Capital Ship Management, was given five-year contracts to handle technical and commercial management for the 25 tankers CPLP contributed to the Diamond S fleet.
Then, as first reported by Tradewinds, the relationship between Marinakis and Stevenson soured.
During a Capital Link panel in October, Marinakis lamented, “My worst business decision so far was the merger we did with Diamond S. It was a very bad decision because the management involved — the CEO involved and the family of the CEO — has the most useless attitude and results I’ve seen since I’ve been actively involved in shipping in the last 20 years.
“Consolidation, in theory, is something that makes a lot of sense, provided you have the right people. People that have a real interest, not only in a very good compensation package for themselves and the rest of the family,” said Marinakis (the full diatribe is on video here).
The Capital Management contracts are part of the merger agreement. Zabrocky said these “will be transitioned out over time with no interruption for customers. The majority of the vessels will be redelivered by the third and fourth quarters.”
Stevenson acknowledged that the deal was not just a two-way negotiation with INSW, but also involved a third party, who could be no other than Marinakis. “We’ve been working on this transaction for an incredibly long time — actually over a year. You don’t just put a three-way deal together overnight,” he said.
Tangled web of tanker transactions
The INSW-Diamond S merger is just the latest chapter in a convoluted history of tanker deals that can take a Venn diagram to untangle.
Stevenson rose to shipping fame as the CEO of OMI Corp. His president was Robert Bugbee. OMI sold out in 2007, at the zenith of the shipping boom, for $2.2 billion.
Stevenson went on to form Diamond S Shipping. Bugbee went on to serve as president for startups Scorpio Tankers (NYSE: STNG) and Scorpio Bulkers.
Back then, Zabrocky was an executive at Overseas Shipholding Group (OSG). Her current CFO, Pribor, was chief financial officer at Peter Georgiopoulos-led General Maritime. General Maritime and OSG filed for Chapter 11 bankruptcy protection in 2011 and 2012, respectively.
After General Maritime emerged from Chapter 11, Pribor joined investment bank Jefferies. Post-bankruptcy, General Maritime, still run by Georgiopoulos, bought seven very large crude carrier (VLCC) newbuild contracts from Scorpio Tankers — where Stevenson’s old partner Bugbee was busy placing speculative orders. General Maritime then merged with Navig8 Crude Tankers and went public via an IPO in 2015 as Gener8 Maritime.
Meanwhile, as part of OSG’s post-bankruptcy restructuring, its foreign-flag fleet was spun off and listed separately as a new entity named International Seaways. OSG’s Zabrocky was named CEO. Pribor left Jefferies and came aboard as CFO.
Over at Gener8 Maritime, debt piled up and the company was put up for sale. Euronav bought the fleet in late 2017. But to reduce the debt load, Euronav simultaneously sold six of the acquired VLCCs to INSW. Tankers previously belonging to Georgiopoulos’ company went to his former CFO’s new company.
And in the latest chapter, Stevenson is walking away yet again — not at the peak like he did in 2007, but at the trough, amid one of one of the industry’s worse-ever slumps — and INSW, the company born from the OSG bankruptcy, is getting bigger still. Click for more FreightWaves/American Shipper articles by Greg Miller
MORE ON TANKER SHIPPING AND SHIPPING STOCKS: Another one bites the dust: LNG shipping’s GasLog to delist: see story here. Minus $7,400 a day? How can shipping rates fall below zero? See story here. OPEC+ deal shocker will prolong crude-tanker bloodletting: see story here.
kamir bouchareb st
very good