Two bulker heavyweights are merging. Star Bulk Carriers of Greece and US-based Eagle Bulk Shipping have sealed a deal to combine into the largest US-listed dry bulk shipping company with a combined fleet of 169 owned vessels on a fully delivered basis.
The transaction unanimously approved by the boards of directors of both companies is structured as an all-stock merger that gives the combined company a pro-forma market capitalisation of $2.1bn.
The deal will see Eagle shareholders receive 2.6211 shares of Star Bulk common stock for each share of Eagle common stock owned, representing a total consideration of around $52.60 per share, a 17% premium based on Eagle’s closing share price of $44.85 on December 8.
Star Bulk and Eagle Bulk shareholders should own about 71% and 29% of the combined company on a fully diluted basis, respectively, when the deal closes in the first half of 2024. The combined company will operate as Star Bulk Carriers Corp and be headquartered in Athens, with offices in Stamford, Singapore, Copenhagen and Limassol.
It gives Eagle an opportunity to thrive under a larger platform
The combined company will be led by Petros Pappas, chief executive of Star Bulk, and will be joined by certain senior executives of Eagle Bulk. Star Bulk’s Spyros Capralos will serve as chairman and one member of the Eagle Board will join the board at closing.
Star Bulk operates a fleet of 117 vessels, from newcastlemax to supramax vessels, while Eagle Bulk owns one of the largest fleets of supramaxes and ultramaxes, consisting of 52 vessels. The combined fleet will be predominately scrubber-fitted.
Star Bulk is expected to have a combined liquidity of nearly $420m. The duo said it expects to generate at least $50m in annual cost and revenue synergies within 12 to 18 months following close through commercial operations integration and economies of scale, including reductions in general and administrative expenses.
Commenting on the merger, Petros Pappas, CEO of Star Bulk, said: “Bringing together Star Bulk and Eagle will create a global leader in dry bulk shipping with a large, diversified, scrubber-fitted fleet. We will leverage both companies’ technical and commercial fleet management capabilities to optimise performance, deliver on our health, safety, and environmental objectives and maximise earnings potential. With a well-capitalised balance sheet, we aim to continue delivering strong cash returns to shareholders while investing in emission reduction technologies as we continue to pursue growth over the long term.”
Gary Vogel, Eagle Bulk chief executive, added: “We are bringing together two highly complementary organizations and are confident that this accretive merger with Star Bulk will unlock significant value for Eagle shareholders, including the opportunity to participate in the long-term upside of the combined company.”
“We believe the deal makes sense for both parties as it continues Star Bulk’s long-term track record of consolidation while it gives Eagle an opportunity to thrive under a larger platform,” noted Jefferies analyst Omar Nokta, adding: “The transaction terms are fair in our view, though given the all-stock nature of the deal, there is the potential for a competing cash offer. However, we would not expect a materially higher offer than the current one given it is based on net asset value.”
“We view the transaction to be positive for both parties, as it would improve relevance and most likely pricing,” stated an update from Arctic Securities.
