Nasdaq-listed dry bulk shipping company Star Bulk Carriers and Eagle Bulk Shipping, one of the world’s largest owner-operators within the midsize dry bulk vessel segment, revealed their intent to merge through an all-stock agreement.
The merger is expected to create a dry bulk shipping powerhouse with a market capitalization of around $2.1 billion, evaluated based on net asset value.
Under the terms of the deal, Eagle shareholders will receive 2.6211 shares of Star Bulk common stock for each share of Eagle common stock owned. This equals to approximately $52.60 per share, a 17% premium based on Eagle’s closing share price of $44.85 on December 8, 2023.
Upon the close of the transaction, Star Bulk and Eagle shareholders will own approximately 71% and 29% of the combined company on a fully diluted basis, respectively.
“Bringing together Star Bulk and Eagle will create a global leader in dry bulk shipping with a large, diversified, scrubber-fitted fleet. Together we will benefit from greater scale with 169 owned vessels, generating meaningful synergies and building an even stronger financial profile,” Petros Pappas , Chief Executive Officer of Star Bulk, said.
“We will leverage both companies’ technical and commercial fleet management capabilities to optimize performance, deliver on our health, safety, and environmental objectives, and maximize earnings potential. With a well-capitalized balance sheet, we aim to continue delivering strong cash returns to shareholders while investing in emission-reduction technologies as we continue to pursue growth over the long term.”
“We are very excited to be joining forces with Star Bulk, uniting two best-in-class companies, both commercially and operationally. We are bringing together two highly complementary organizations and are confident that this accretive merger with Star Bulk will unlock significant value for Eagle shareholders, including the opportunity to participate in the long-term upside of the combined company,” Gary Vogel, Eagle Chief Executive Officer, said.
Strategic and Financial Benefits
Some of the key strategic benefits of the merger include the creation of the largest U.S.-listed dry bulk shipping company with a combined fleet of 169 owned-vessels on a fully delivered basis, 97% of which are fitted with Exhaust Gas Cleaning Systems (scrubbers), ranging from Newcastlemax/Capesize to Supramax/Ultramax vessels and a global market presence.
Both companies employ fully integrated ship management operations across commercial and technical management, and Star Bulk will leverage Eagle’s expertise in the Supramax/Ultramax sector to improve upon utilization and performance.
Furthermore, the combined company is expected to have combined liquidity of nearly $420 million , as of September 30, 2023, and net leverage of approximately 37%
The transaction is expected to generate at least $50 million in annual cost and revenue synergies within 12-18 months following close through commercial operations integration and economies of scale, including reductions in general and administrative expenses.
Finally, the combined company is expected to have significantly increased pro forma market capitalization and expected trading liquidity in the dry bulk sector. With increased size and liquidity, the combined company expects to reduce its cost of capital.
The combined company will be led by the current management team of Star Bulk and will be joined by certain senior executives of Eagle. Upon close, Mr. Pappas will serve as CEO of the combined company and Spyros Capralos, current Chairman of Star Bulk, will serve as Chairman of the Board. One member of the Eagle Board will join the Star Bulk Board at closing.
The combined company will operate as Star Bulk Carriers Corp. and will be headquartered in Athens, Greece, while maintaining offices in Stamford, Connecticut, Singapore, Copenhagen, and Limassol.
The transaction is expected to close in the first half of 2024, subject to approval by Eagle shareholders, receipt of applicable regulatory approvals, and satisfaction of other customary closing conditions.