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OSG buys Maritrans for $455m to form US flag giant

September 25, 2006
OSG buys Maritrans for $455m to form US flag giant. Check it out:
(Lloyds List Via Thomson Dialog NewsEdge) OVERSEAS Shipholding Group's $455m acquisition of Maritrans, the venerable Jones Act tanker and barge player, has created the largest player in US flag petroleum shipping.

The all-cash deal announced yesterday, in one fell swoop, removes a major regional rival for OSG and solves the conundrum of pitting its product tankers against Maritrans' articulated tug barges.

Some analysts are already speculating that the conquest is the first tangible precursor of OSG's stated ambition to reverse all its US-flag business into one enterprise and then spin it off.

For now, Maritrans' assets are to be subsumed into OSG's US-flag strategic division.

The deal adds complementary geographical markets to OSG's portfolio.

It puts OSG's $300m Capital Construction Fund to use, and validates OSG's recent statements about using its hoard of cash to become even more of a 'market leader'.

The deal also appears to do justice to Maritrans' intrinsic value, with the $37.50 a share OSG has agreed to pay being almost a 50% premium to Maritrans' prevailing share price.

Natasha Boyden, Cantor Fitzgerald equity analyst in New York, who has closely followed Maritrans in recent years, said: 'Maritrans has been undervalued for some time now. It is good to see that the market is not unaware of the company's true worth.'

Jonathan Whitworth, Maritrans chairman and chief executive, paid tribute to OSG's 'financial strength', and added: 'A greater commercial footprint will allow us to serve customers better. The larger fleet also enhances our market intelligence.'

Mr Whitworth is to remain with OSG after the merger as senior vice president, heading up the US-flag strategic business unit that will be run out of Tampa.

The deal will add Maritrans' 11 ATB's, three ATB newbuildings and five product tankers, two of which have been converted to grain-carriers, to OSG's seven tankers and 10 newbuildings.

Morten Arntzen, OSG president and chief executive, hailed the 'strategic fit' of Maritrans and the 'growth opportunities in US-flag business'.

He added: 'The lightering business in Delaware Bay and the addition of new customers in the complementary ATB Gulf of Mexico and Florida short-haul trade will contribute to our business.'

Maritrans' $232.5m ATB trio under construction at Bender Shipbuilding will allow OSG to use a 'substantial portion' of its Capital Construction Fund, OSG said. The CCF market value stood at $300m in OSG's June 30 accounts.

The purchase consideration of $455m including outstanding debt will come from available cash and existing loan agreements, OSG said. June 30 working capital stood at $228m, and OSG has a seven-year $1.8bn revolving credit facility.

The deal will be 'immediately accretive before considering any transaction synergies,' OSG said

Copyright 2006 Informa Martime Trade and Transport

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