OSG Makes First Major Bet on Shipping Markets

With cash building on the balance sheets and shares trading at healthy multiples of book and asset values, many public shipping companies, have been continuing their drive to consolidate their markets, broaden the profile of their fleets and diversify their sources of revenue.

The most recent, and perhaps most dramatic example of this is OSG’s momentous $1.3 billion acquisition of Stelmar in mid-December. And that’s not even the only major deal that OSG has done since Morten Arntzen joined the company as CEO a year ago. The company has purchased U.S. flag tankers, secured 25-year contracts for 2 LNG carriers and acquired a 50% interest in 4 ULCCs. However, the NYSE-listed tanker company’s recent decision to acquire Stelmar Shipping for $48/share stands out as the first time the company has actually made an aggressive bet on the markets rather than simply using its superior balance sheet to generate a return on shareholder equity.

The $1.3 billion acquisition, which is expected to close in January, is a mammoth and transformational one for OSG. It will nearly double the company’s international fleet from about 50 to about 90 tankers, establish a major foothold in the product tanker market and require an outlay of $843 million in cash and the assumption of Stelmar’s $450 million in net debt.

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