Star Bulk Walks Away From 470 Million Dollar Genco Fleet Deal
Star Bulk Carriers has terminated its agreement to acquire sixteen bulk carriers for 470.5 million dollars, removing a central component from a long-running attempt by one Greek owner to take over an American-listed competitor. The two parties announced the mutual termination on 10 August, and the request to end the agreement came from Star Bulk.
The original arrangement, signed on 6 March, would have transferred sixteen vessels comprising one Newcastlemax, six Capesizes, seven Ultramaxes and two Supramaxes, amounting to 1.8 million deadweight tonnes at an average age of 11.4 years. Completion was conditional on the acquiring owner succeeding in its bid for the American company, and the sale would have taken Star Bulk to 157 ships and 15.9 million deadweight tonnes. The structure was designed to fund part of the takeover by disposing of assets the acquirer did not want, which is a standard technique and one that only works while the buyer of those assets remains committed.
The takeover attempt has not gone well. A proxy contest in June ended with all six of the target's directors re-elected, and a tender offer expired on 24 July with 31.6 percent of shares outside the bidder's control tendered, short of what would have been needed to force the outcome. The current offer stands at 24.80 dollars per share in cash, adjusted for a dividend, plus one share in the bidder valued at 2.54 dollars, supported by 1.411 billion dollars of committed financing from six banks and carrying no financing condition.
The target's board had characterised the vessel sale as a fire sale, arguing that the ships were being disposed of at prices materially below broker valuations, and cited specific vessels where its own assessment differed from the agreed price by substantial margins. Those were the target's characterisations and no rebutting figures have been published. An earlier account of the financing package gave a different total from the one now stated, and the offer price has been raised during the contest, so figures from the spring should be date-stamped rather than compared directly with current ones.
What the withdrawal signals is a judgement about probability rather than about price. Star Bulk was buying assets contingent on somebody else's takeover succeeding, and carrying that commitment costs it optionality while the outcome remains unresolved. Walking away after five months, following a lost proxy fight and an undersubscribed tender, is the action of a buyer that no longer expects the condition to be satisfied. For the bidder it removes a funding leg and leaves the offer standing on its own.
