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General Maritime and Navig8 Crude merger and questions of Oaktree

General Maritime and Navig8 Crude merger and questions of Oaktree
Last week saw the announcement that General Maritime and the Norway-listed crude tanker entity within Navig8 would be joining forces in a stock for stock deal described variously as a “merger” or, more properly, as an “acquisition” with the General Maritime team taking the helm of the entity- but with Navig8’s commercial team booking the vessels through the well established Navig8 pools.

Though the deal, however described, has been long anticipated, the non-transparent nature of both entities leaves observers with many questions. Oaktree is a long time pre-IPO investor at General Maritime from back in the mid-1990s when it was known as Maritime Equity Management. Though Oaktree ostensibly takes a back seat role in Navig8’s crude tanker business, which has Board representation instead from investors led by Avenue Capital and Monarch Alternative Capital. Oaktree has co-operated in various business ventures with these two PE players previously.

Indeed, Monarch Alternative Capital is closely linked to Oaktree both have been big investors in Star Bulk Carriers, on the dry side of the business.

An explicit Oaktree connection has been denied, however, an all stock deal would likely never happen without Private Equity’s ties to both entities, particularly to the acquired company, Navig8 Crude Tankers, where investors need to be comfortable with the payment they are receiving. Further down the road, if the tanker and equity markets are cooperative, a listing in New York might be in the cards.

Though economists can debate exactly how much pricing power merged shipping companies might have, compared to more concentrated industries, “consolidation” is always in the Powerpoint slides when the mysterious providers of alternative capital decide to talk about their shipping investments. The strong tanker market lately has put consolidation in the air, as Tankers International, dominated by the now listed Euronav (a darling of financial investors) has gotten together with Frontline.

Frontline itself is now looking at merging with Frontline 2012, once the latter moves its drybulk and gas tanker investments out. Thus, Gener8, with the 46 large tankers it would control, would be joining an elite peer group.

On the dry side, where Oaktree has been trying to assemble the pieces of an enlarged Star Bulk Carriers, the freight markets have not cooperated. Parenthetically, Star Bulk may be getting even bigger, depending how the ongoing drama at Eagle Bulk - an Oaktree Holding - plays out.

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