HøEGH FINALLY GOES…PRIVATE

By Matt McCleery and Urs Dür

In a move that we’ve been anticipating for several years, Aequitas Holdings, of which Leif O. Høegh is the Chairman and Morten W. Høegh and Westye Høegh are Directors, successfully tendered, the week of 1st May, for the 35% the shares in Oslo-listed Leif Hoegh (Oslo: LHO) that they did not already control.

Although we think it’s an important deal, it is not a huge one in dollar terms – Aequitas will pay $160 million in cash for the 35% of Leif Hoegh they do not already own, valuing the company’s equity at about $503m and allowing them to purchase the company for 3.1 4x EBITDA, a favorable multiple for the buyer especially when you consider how much of the fleet is on long term contracts.

Plus, thanks to the fact that Leif Hoegh had $250m in cash and equivalents at ’02 year end and balance sheet leverage of only 50%, Aequitas was able to finance its entire purchase LBO- style, using the cash in the company and equity on the balance sheet to support a acquisition debt financing arranged by Nordea, DnB and Hamburgische Landesbank Giroz. Even with the new debt in place, balance sheet book leverage will rise from about 50% to a bit more than 65%, still very reasonable based on the company’s industrial business model, and we would be surprised if Aequitas hasn’t advised banks that it will begin selling off its reefer and bulk interests and use the proceeds to pay down some debt, just a Marine Money guess on the latter.

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