Jefferies names Norton head of shipping
The new head of shipping at the investment bank Jefferies & Co. Inc predicts increased merger and acquisition activity in the maritime industry and more private companies tapping the public markets for funds.
Hamish Norton, was named a managing director at Jefferies and head of its maritime shipping investment banking group Tuesday. Norton comes to the company from Bear Stearns, and replaces John Sinders, who recently retired.
He heads a 20-person team, which Norton said is larger than maritime teams at other investment banking firms. Just less than half the Jefferies shipping department is located in New York, while the others are located in London, Houston and Singapore.
Jefferies has been involved in recent years in the initial public stock offering for Genco Shipping and Trading, the spinoff of Ship Finance Ltd. from Frontline, and representation of Stelmar in its merger with Overseas Shipholding Group.
“I think the market is going to get more active as the number and size of the publicly listed shipping companies is doing nothing but increasing,” Norton said. “The more of these companies that one has, and the larger their market cap is, the more they can do in the capital market and merger market.
“I think you are going to see consolidation as well as private companies going public,” he added. “If all you look at is the public companies, you may not see the consolidation. The vast bulk of the shipping industry is private, and it is pretty well invisible to the average investor.”
So while the industry consolidates, investors may actually see a growing number of public companies whose stocks they can own.
What does that consolidation mean for shippers?
“Size breeds efficiency,” he said. “I think you could argue that size breeds market power — but I have yet to see any shipping company that has any market power, really. I think the shippers are going to benefit from the trend.
“The fear of the shipping companies and the hope of the shipper is that a lot more ships get built,” Norton noted. “The question is always: Will the growth in world trade exceed the net delivery of ships? So far, growth in world trade has exceeded both everybody’s expectation and the delivery schedule of shipyards. So, shipping rates have continued up.”
New York has been the most active market for shipping companies to raise equity. But Norton predicts that London will become more active, pointing to deals by Globus Shipping and Goldenport Shipmanagement.
“Pricing is similar for similar companies” in the two markets, he said, and some companies may be attracted to London because of regulatory differences.
“Sarbanes Oxley compliance costs money, and for a smaller company, it costs a larger fraction of their net income to comply. So, London can be very appealing in certain cases,” Norton explained.
He also expects to see more companies involved in container shipping to tap the public markets.
“Several people are plotting competition for Seaspan and Danaos as we speak,” he said, pointing to two New York Stock Exchange companies that are in the business of owning and chartering containerships to liner companies.
“I’m also a little surprised by how few public container liner companies there are,” Norton said. While Jones Act carriers like Horizon Lines, Trailer Bridge, and Alexander and Baldwin, the parent of Matson Line are publicly traded, “I would hope we will see some international container lines being public in New York and London.”
