Sohmen-Pao’s thoughts on partnerships and public versus private

Photo: BW Group andreas-sohmen-pao-1-small.jpg
Andreas Sohmen-Pao
Andreas Sohmen-Pao’s BW Group has been extremely active in consolidation of shipping companies in both the public and private markets over the last 12 months.

Speaking with Abhishek Pandey, Global Head of Shipping, Standard Chartered, at Marine Money Singapore Ship Finance Forum 2021, Sohmen-Pao, BW Group Chairman, outlined his thoughts on partnerships and public versus private markets.

Asked by Pandey about what BW Group looks for in a partner Sohmen-Pao explained the benefits he sees in having the right partners in business.

In terms of what is looked for in a partner Sohmen-Pao asked: “Do you believe in the facts or do you believe in alternative facts? Are you willing to partner and share in order to deliver better results for our shareholders?”

From the perspective of BW he said: “We’re happy to partner with others, we’re even happy for them to take driving seat if we think they’re going to be good stewards of capital. We have partnerships with public investors, sovereign wealth funds, private equity firms, customers, Japanese trading houses, even fellow shipping companies, and we think partnership is a good way to go if you find the right partners and you deliver better results."

Whether shipping companies are better as private concerns rather public-listed entities has long been a topic for debate in the industry. BW operates both spheres - it is a private company at a group level, but also has a number of public-listed subsidiaries, allowing Sohmen-Pao to give a perspective on both sides of the equation when asked which was better for shipping companies by Pandey.

“Public markets can be very frustrating. Why do people want to buy more ships when prices are high at the top of the cycle and they don’t want to invest money when its low and it’s the right time to be investing? Why are two companies valued the same based on NAV when one is producing double the profits of the other one?” Sohmen-Pao asked.

The answer he believes is that those shareholders investing with less than a year horizon don’t really care much about earnings, what they are looking for the stock price to move in the right direction.

“But if you’re a long term shareholder you do care, or if you’re financing a business you do care about earnings and profits, and the way we think about public markets is you can get the both worlds,” he said.

“If the markets don’t value you properly then just run a great business, take out the profits as dividends and it’s just like a private company, you’re getting good earnings and you’re running a good business. Then you can also use your shares as currency when the market values you properly or if other people are willing to NAV to NAV deals.

“I think it’s maybe to simplistic to say public markets ‘bad‘, private markets ‘good’. Public markets can be as effective as private but with some added benefits,” Sohmen-Pao concluded.

 

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