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OSG being acquired by Saltchuk

Photo: Barry Parker OSG_MR_TANKER_source_BARRY_PARKER.jpg
The universe of listed US based shipping players is about to shrink further with Overseas Shipholding Group (OSG) being acquired by its largest shareholder.

OSG with a fleet of tug/barge units serving the US Gulf and East Coast, MR tankers mainly in coastal trades, and Suezmax tankers in the Alaska trade, said it had reached a definitive agreement to be acquired by privately held Saltchuk Resources.

The soon to be acquirer is diversified company whose holdings include Tote, running container vessels in the Jones Act, Foss Maritime, running tugs and barges also Jones Act, and Tropical Shipping serving the Caribbean with international flagged vessels.

The deal at $8.50 per share, would be valued overall at $950 million of which $650 million is equity. The present OSG, operating mainly Jones Act assets (three MR tankers operate internationally in the Maritime Security Program), had been decoupled from the international flag tanker company International Seaways (INSW). The spinoff came out of a restructuring that was completed in late 2016.

On Monday -in much heavier than normal trading, OSG’s stock price traded near $8.50 per share, the announced acquisition price. Though international tanker share prices had been surging in the past year, with gains exceeding popular indices such as the S&P 500 and the Nasdaq, OSG’s gains had been muted up until the previous week, when it began inching up. A year ago, the stock was trading at around $4.00 per share, and then had bumped up to around $6.00 per share in late January, 2024 when Saltchuk had disclosed a “non-binding expression of interest” in OSG.  

According to announcements, the acquisition, not subject to financing, has been approved by the Boards of both companies, and is anticipated to close in the next few months. The deal will be funded through a combination of committed debt financing and cash on hand, according to the companies.

A tender offer for outstanding shares will commence within the next three weeks - 15 business days from the date of the actual Merger agreement on 19 May. The announcements explain that: “Promptly following the successful completion of the tender offer, Saltchuk will acquire all remaining OSG shares not purchased in the tender offer through a second-step merger at the same price.”

The strength in the tanker markets was apparent in OSG’s earnings for the quarter that ended at end March, 2024. In its Form 10-Q, detailing results, earnings for its Jones Act MR tankers, (all on fixed charters, were averaging $70,975 per day, with its articulated tug/ barges  (ATBs), also all locked up on charters, averaging just under $48,000 per day. In the lightering trade in Delaware Bay, earnings, on a spot basis, came in at a time charter equivalent of $126,069 per day.

OSG has also been looking ahead to potentially emerging energy trades; it has been awarded multiple grants from the US Department of Energy (DOE) to study the possible transportation of liquid carbon in ATBs, within a regional energy hub that might be developed in Tampa- where OSG is headquartered.

OSG will operate as a standalone business unit. According to regulatory filings,“Saltchuk agreed to engage in good faith negotiations regarding the terms of a new employment agreement with each executive officer”.  This will see top management retained, including OSG’s Chief Executive Officer, Sam Norton.

Resources:

The Merger Agreement:   https://www.sec.gov/ix?doc=/Archives/edgar/data/0000075208/000149315224020533/form8-k.htm

Form 10-Q for 2024 Q1

https://www.sec.gov/ix?doc=/Archives/edgar/data/75208/000149315224018632/form10-q.htm