Dry Bulk Shipper Excel Saves Quintana's Day

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Ruthie Ackerman, Forbes
January 29, 2008

Just when Quintana Maritime thought all hope for a possible sale was lost, Greek drybulk shipper Excel Maritime Carriers saved the day.

On Tuesday Excel (nyse: EXM - news - people ) announced it would buy Quintana (nasdaq: QMAR - news - people ) in ea cash-and-stock deal worth $2.5 billion, including the assumption of debt and other costs.

Quintana investors liked what they heard, sending the dry bulk shippers’ shares up 30.4%, or $5.13, to $22.02 at the close. Excel’s shares fell 3.7%, or $1.22, to $31.78. It’s common for shares of a company to fall when it announces an acquisition because ti often takes several years before the benefits of the bid outweigh the losses.

Last week Quintana concluded its sales process after failing to receive a proposal that was “financially and contractually attractive.” The company, which put itself up for sale last year, said that the significant deterioration in the dry bulk charter market and the ensuing volatility contributed to the decision to remain an independent publicly traded company.

Excel Maritime will pay $13 per share and 0.4084 of its common stock for each Quintana share as part of the deal.

Based on Excel’s Monday closing price of $33, and unadjusted for dividend payments, the deal values Quintana at $26.48 per share, a 57% premium to its closing price of $16.89 on Monday, the company said.

Stamatis Molaris, chief executive officer of Quintana, said Excel’s offer was very attractive for the company. “By capturing significant value in cash and retaining equity upside via stock in the combined company, we believe that we are delivering the ideal value combination to our shareholders.”

Cantor Fitzgerald analyst Natasha Boyden said that the acquisition price of $26.48 per share is at a discount to the net asset value of $29.02 she calculated for the company. But she said that the price is “reasonable” since a number of Quintana’s ships are fixed on time charter contracts significantly below market value.

The companies expect the deal to close in the second quarter of 2008.

Excel said it received a financing commitment for $1.4 billion from a syndicate of international banks led by Nordea Bank Finland, London. The combined company will operate a fleet of 47 vessels with a total carrying capacity of 3.7 million dead weight tons. By 2010 Excel expects to have 55 vessels.

The good news sent dry bulk shippers soaring despite the fact that the Baltic Dry Index, which measures dry bulk shipping rates in 40 routes across the world and is managed by the Baltic Exchange in London, fell 77 points Tuesday to close at 5,615, its lowest point since June 20 of last year. Concerns over iron ore price negotiations in China and port congestion have caused massive declines in the sector since late last year.

Diana Shipping jumped 9.1%, or $2.23, to $26.66 at the close, while DryShips (nasdaq: DRYS - news - people ) gained 5.3%, or $3.15, to $62.44. Navios Maritime Holdings (nyse: NMWS - news - people ) rose 11.9%, or $1.15, to $10.82.

The Associated Press contributed to this article.

Source: Forbes