Greek shipping company Capital Product Partners has agreed to spin off its crude and product tanker business and merge it with businesses owned by tanker owner and operator DSS Holdings.
The parties have entered into a definitive transaction agreement to undertake the merger in a share-for-share transaction, forming a new company named Diamond S Shipping Inc.
The USD 1.65 billion deal would involve 68 tankers, made up of 43 tankers from Diamond S Shipping and 25 from Capital Product Partners, and create the third largest publicly traded MR and product fleet in the world, and one of the world’s largest public mixed product and crude fleet operators.
The new company would benefit from a balanced and large-scale portfolio of vessels, strong management leadership and a cost-efficient commercial platform, according to Capital Product Partners. The new company is expected to be listed on the New York Stock Exchange and will be headquartered in Greenwich, Connecticut.
“This merger will be most significant in the MR2 tanker market. The trading areas of the two fleets is varied, CPLP appears to bring commercial relationships with operators well entrenched in the Latin American market, particularly Brazil. Diamond S MRs see more activity in the US Gulf, Singapore, and the far east,” Court Smith, VesselsValue Senior Analyst, said.
“Regardless of who is ultimately fixing these ships on a day to day basis, the merger now creates an owner with a global footprint in the clean tanker markets,” Smith added.
CPLP intends to continue as a master limited partnership, with a modern fleet under medium- to long-term charters producing stable cash flows in the container sector complemented by one drybulk vessel. CPLP said it expects to be well positioned going forward to engage in asset acquisitions across different shipping segments with the aim of growing its per unit distributable cash flow.
The transaction is valued on an NAV-to-NAV basis with CPLP receiving USD 23 million in consideration in the form of around 3% incremental ownership in Diamond S Shipping Inc. related to certain transaction benefits including access to public markets and enhanced scale. The transaction results in CPLP unitholders initially owning 33% and DSS equity owners initially owning 67% of the new company.