'Smart money' takes control of listed group M&A deals

Gener8 Maritime’s takeover by Euronav is the latest in a growing trend of shipping mergers and acquisitions driven by private equity investors, the new issue of TW+ reveals.

An approaching end-game for "smart money" funds looking to make good on their investments or seeking better places to use their cash means that many who piled into shipping between 2011 and 2013 are now pushing for deals over the heads of shipowning company managements.

US documents reveal Gener8 was at centre of takeover dogfight

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Euronav’s takeover is part of that process, International Seaways chief financial officer Jeff Pribor told the latest quarterly issue of the magazine published by TradeWinds.

“It’s further evidence of a trend that’s already started,” he said. “A consolidation trend has begun, and logically it will continue.”

An executive of one publicly owned shipping company said funds would find a way out if they needed or wanted to exit. “Everyone with significant private equity investments wants to do things to help them get out. Because they’re going to do it,” he told TW+.

Gener8’s Peter Georgiopoulos achieved early success for, and with, private equity investors with General Maritime in tankers, which floated in 2001 and Genco Shipping & Trading in bulkers, which launched its initial public offering in 2005.

2180c6d665f86533c54e77e61ff50f68 Euronav chief executive Paddy Rodgers made his move for Gener8 by bypassing its management and pitching direct to private equity investors Photo: Susanne Hakuba

Those profitable investments led backers such as Oaktree Capital Management to keep faith in Georgiopoulos. Oaktree ultimately became the largest holder of Genmar successor Gener8 through a bankruptcy reorganisation, merger and subsequent IPO in 2015.

Other private equity funds also jumped in around the time of Genmar’s 2011-12 Chapter 11 reorganisation. Large holders with seats on the seven-member board include Avenue Capital Group, BlueMountain Capital Management and Aurora Capital Partners.

But from a $14-a-share deal price, Gener8 shares have fallen away and were trading at $4.37 when Euronav revealed its offer, which now values the shares at a relatively generous $5.89.

87e0ff8cf95d16ccded51a014bc1119f International Seaways chief financial officer Jeff Pribor Photo: International Seaways

“The time frame is approaching seven years now for some of the current [Gener8] investors,” a source said. “Some of these guys lost money and they needed a path to liquidity. They needed a bigger company, and whatever that took, they were going to do.”

It is not the first deal to have followed such a path.

Scorpio Tankers acquired Navig8 Product Tankers for $1.1bn in a shares-and-cash deal that closed last August. That sale was “stimulated by a need for private equity to exit” its investment in Navig8, according to Andrew Bednar of asset-management firm Perella Weinberg, which advised Scorpio.

Apollo Global Management, which backed Principal Maritime Management in 2010, was looking for a way out by 2015, culminating in a $662m fleet sale to Teekay Tankers.

Teekay Tankers made a second swoop last year, taking over the $500m fleet of sister company Tanker Investments in an all-shares deal that was apparently motivated by outside investors that wanted out.