New $1bn Star is born

Petros Pappas and Oaktree Capital are creating the largest dry cargo company in the US capital markets via the merger of Nasdaq quoted Star Bulk and IPO hopeful Oceanbulk.

Shipping's largest private equity investor Oaktree will have a 61.3% slice of the new company with Pappas controlling 12.5% of the stock following the all-shares deal.

Star will take over 15 trading vessels and 26 newbuildings from Oceanbulk as part of the agreement, which comes just a couple of months after the latter emerged as an IPO candidate.

As part of the super-sizing of Star Bulk into a $1bn company, Pappas will become chief executive and incumbent Spyros Capralos takes the title of non-executive chairman.

Capralos said: "We believe that the transaction is accretive to earnings, cash flow, and net asset value, and also has additional benefits as it will dramatically increase the market capitalization and asset base, enhance the on-the-water fleet portfolio, increase the newbuilding portfolio by combining two similar newbuild strategies, and improve access to capital to fund the current and assumed capital expenditure obligations.

"In addition, the combined business will be well positioned to capitalize on an improving dry bulk market with significant operating leverage to rising rates."

Its combined fleet of 69 vessels includes 33 capesizes and newcastlemax vessels. Its tally includes 39 eco and seven semi-eco vessels.

“Following the transaction, the company intends to pursue additional accretive acquisition transactions,” a statement said.  The combined company's size provides it with a substantial commercial presence and provides additional economies of scale on technical operations.”

With the new shares issued as part of the deal Star will have a market capitalisation of $1.009bn, it said.

This is based on 54.104 million shares in circulation at $12.07 each.

"The combined fleet profile with a significant number of capesize and Newcastlemaxes bulk carriers coupled with the current company chartering strategy provides significant earnings and cash flow upside in strong markets,” the statement added.

Today’s merger makes Star Bulk the third dry cargo behemoth created in the US capital markets this year after the 74 newbuildings of Scorpio Bulkers and the 39 capesizes boasted by the reformed Knightsbridge after its takeover of the Frontline 2012 orderbook.