Star Bulk’s countercyclical Excel Maritime acquisition

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Star Bulk’s contracts with Excel Maritime

On August 19, 2014, Star Bulk Carrier Corp (SBLK) entered into definitive contracts for the acquisition of 26 secondhand vessels (out of a total of 34 vessels with 8 vessels already delivered) from Excel Maritime Carriers Ltd., for an aggregate of 29.9 million shares of Star Bulk common stock and $288.39 million in cash. Star Bulk will acquire the vessels in a series of closings that the company expects to complete by the end of 2014.

The acquisition includes construction of an additional 35 vessels in Japan and China, including 13 Newcastlemax vessels, eight Capesize vessels, and 14 Ultramax vessels with fuel-efficient specifications. Deliveries are expected in 2014, 2015, and early 2016.

Shareholding post Excel

Star Bulk’s acquisition is countercyclical 

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Star Bulk Carrier’s (SBLK) acquisition from Excel Maritime is well-timed from a short-term and a long-term point of view. The company acquired Panamax/ Kamsarmax vessels at historically low prices, with Panamax vessel prices currently at the lowest level in 2014, a 21% decline compared to its peak in April. Panamax/ Kamsarmax vessels have the lowest order book of all major dry bulk vessel classes, or ~19% according to data from Clarksons.

There are signs of increasing scrapping activity in the Panamax sector. Companies like Diana Shipping Inc. (DSX), Knightsbridge Shipping Ltd (VLCCF), Navios Maritime Holdings (NM), and Eagle Bulk Shipping Inc. (EGLE) would be affected by such industry movements. The Guggenheim Shipping exchange-traded fund (or ETF) (SEA) tracks these companies.

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