- Star Bulk Carrier and Eagle Bulk Shipping announced the merger on Dec. 11.
- The global marine industry affects a variety of business sectors.
- Recent geopolitical unrest may drive freight costs higher and may benefit the industry in the short term.
- The long-term outlook may not be as appealing as the outlook for the general market.
Eagle Bulk Shipping Inc. (EGLE, Financial) has announced the acquisition by Star Bulk Carrier’s Corp. (SBLK, Financial) in an all-stock merger with a market capitalization of $2.1 billion, reports Guru Focus.
Petros Pappas, Star’s CEO, will retain his leadership role and Eagle management will assume supporting roles.
According to a recent Barron article, the merger creates “the fourth-biggest commodities carrier, one that is large enough to be attractive to a wider pool of investors such as mutual funds that normally aren’t interested in companies worth less than $1 billion.”
How Star Bulk Carrier’s merger may play out in the turbulent shipping industry?
Star Bulk Carriers, founded in 2006, has a market capitalization of nearly $2 billion and annual 2022 revenue of $1.4 billion. The company operates a range of vessel sizes in the dry bulk shipping industry. As of this writing, the company has a GF Score of 81 out of 100 with a range of values from 18 to 81 throughout its lifetime, peaking this year.
Eagle Bulk Shipping, founded in 2005, focuses on midsize dry bulk vessel operations. The company has a market capitalization of $535.5 million and annual 2022 revenue of $719.8 million. The business’ revenues are roughly equally split between voyage charters and time charters. As of this writing, the company has a GF of 77 with a range of values from 22 to 82 throughout its lifetime, peaking in 2014.
In a prepared statement, Pappas announced: “This transaction will create a global leader in dry bulk shipping with a large, diversified, and scrubber-fitted fleet of 169 vessels. We believe the transaction will increase our ability to serve our customers with proven technical and commercial management expertise and deliver significant cost and revenue synergies to our shareholders.”
Gary Vogel, Eagle’s CEO, is also enthused about the merger and said, “The combined company will remain committed to returning significant capital to the shareholders and will have greater trading liquidity and enhanced prospects for growth.”
The terms of the agreement include exchanging “2.6 shares of Star Bulk common stock for each share of Eagle common stock owned” or $52 a share, a 17% premium based on the Dec. 8 closing price.
The press release and accompanying conference call paint a glowing picture of the merger with optimistic projections. Both leaders believe this event will create a premier dry bulk shipping company with a strong competitive advantage and a bright future. As of Dec. 22, 2022, the share price has jumped nearly 23% to over $55. So much for the premium, the share price exceeds it by $2; however, GuruFocus gives the stock a GF Value of $47.64.
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Source: Guru Focus
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