Acquisitions seen rising in shipping sector, expert says

The world’s shipping industry is heading for consolidation and this year the sector could see several record-breaking, billion-dollar acquisitions, a leading financier to the industry said yesterday. The highly fragmented industry – in which Greek interests control about a fifth of the world’s fleet – has seen a raft of new listings and acquisitions in the past two years. «Going forward in 2006, we will see some billion-dollar transactions taking place,» Simon Rose, chief executive officer of boutique investment bank Dahlman Rose, told Reuters in a telephone interview. «We are seeing a gradual consolidation in the shipping market,» he added. «But it will be a five-year process.» Earlier this month, Athens-based and US-listed Quintana Maritime acquired a 17-vessel dry-bulk fleet from private Greek shipper Metrobulk for $735 million – one of the largest acquisitions in shipping history. Dahlman Rose, which helped arrange financing for the deal, has raised $1.5 billion in equity for shipping companies over the past 12 months – most of that in initial public offerings. China boom Generally strong shipping rates in the past two years – partly thanks to import demand from China’s fast-growing economy – have helped lift industry profits and fueled new interest from investors in the United States and worldwide. «This year we will see half a dozen or so shipping IPOs and another half-a-dozen other kinds of capital-raising exercises in US markets,» Rose said. «In general, we will see fewer deals to raise capital, but they will be bigger in size. In other words, fewer companies, but more dollars involved.» In 2005, some two dozen shipping companies listed on US markets, including Greek-controlled DryShips, Diana Shipping, Quintana, Aries Maritime and StealthGas, raising $1 billion in equity among them. «I think there has been a paucity of offerings in the US this year, but my expectation is that the number will increase,» Rose said. The world’s ocean-going shipping market is made up of two major segments – dry-bulk carriers and oil tankers representing about 10,000 vessels and about 700 million deadweight tons. But new environmental regulations on double-hulled tankers will require as much as a third of the 4,000 vessel tanker fleet to be replaced in the next four years. That will require further investment in new ships which, in turn, will lead to more equity being raised and further consolidation as only the bigger shippers will be able to raise the required finance, Rose said.