Seatrade Maritime: US shipping IPOs dry up, mergers and privatisation dominate

In recent years the focus at Marine Money’s late autumn New York conference has been less about publicly listed companies, with shares listed on big exchanges or traded over the counter, and those financing them, and more about non-public entities. 

Mark Friedman from investment bank Evercore took the audience through what he called “The Great Unwind”- where both US and non- US markets saw consolidations in the form of mergers and privatisations. 

Friedman, the architect of many of the deals described, explained that the listed shipping companies, whose ranks included OSG, OMI, Kirby and Teekay plus a few others, were scarce prior to the early 2000’s, when China joined the World Trade Organization (WTO) and the markets surged. Friedman estimated that some 50 shipping companies gained public listings in the years through 2010, with a spate of spinoffs and re-capitalizations (examples being a wave of Master Limited Partnerships). 

But then in the 2010’s, the markets shifted with Norway becoming a key growth market, while interest among investors in the States waned, along with deteriorating cash flows. He pointed to two major IPOs during those years, Euronav (now CMB.TECH) in 2015 and Zim in 2021. 

In Friedman’s view of the markets, “bigger is better”- he pointed to a marketplace that is “cheering consolidation.” Underlying this applause is a preference for larger companies benefitting from scale, synergies, more liquidity that comes with higher capitalizations; these, in turn, gain market support and coverage by equity analysts. In a group of slides displaying actual data, he noted that increased scale (measured by market capitalisation) correlates with better valuations (measured by share price/ net asset value- NAV); he highlighted the current frothy conditions in the tanker market. 

The presentation looked at reasons for the privatisation trend, citing the high costs for being public- including pressures to distribute capital (impacting NAV), and – importantly the greater flexibility for private companies create future value by investing counter-cyclically. He cited a number of recent privatisations including LNG player CoolCo being acquired by Eastern Pacific Shipping and last year’s acquisition of OSG, which an earlier iteration owning international tankers had gone public in 1970, by Saltchuk.  

Presentations are not always free of controversy. An unscripted moment during the Marine Money morning saw Nikolaus Schües – CEO of F. Laeisz, and former President of Bimco, in a dialogue following Friedman’s time at the podium, intimating that listed companies had moved out of favour with investors by implementing shareholder unfriendly strategies such as “poison pills” – designed to thwart buyers by issuing dilutive shares. 

“If you are a listed company, you are always for sale,” Schües, stated.