The investment group that includes the current Chairman of Atlas Corp. and Ocean Network Express (ONE) as an investor sought to increase the pressure on Seaspan’s parent Atlas to accept its go private offer. The group announced that it was unilaterally increasing its offer to acquire all the outstanding shares of Atlas by seven percent which resulted in an initial increase of the share price of nearly 15 percent before the stock price slid back in an overall down day for the stock market.
Calling itself the Poseidon Acquisition Corp., they cited that it has been more than seven weeks since they made their initial offer to take the parent of the large owner/lessor of containerships private. Seaspan currently owns 130 containerships with approximately another 70 on order with most of its vessels operating on long-term charters to the world’s leading container shipping lines. ONE along with Yang Ming and COSCO is Seaspan’s largest customers.
The initial buyout offer for the shares not already owned by the investment group came on August 8 at a price of $14.45 per share. The group highlighted that its first offer was a better than 30 percent premium over the 30-day trading average for the stock. Today, they increased the offer to $15.50 per common share with the offer remaining contingent on acceptance by the board and shareholders.
“It is our hope that in light of this significant increase in value, the Special Committee will conclude that this transaction represents full, fair, and certain value and is in the best interest of Atlas shareholders,” the group writes in a new letter to Atlas. They noted that the offer was being increased while global financial markets deteriorated significantly in the same period.
They cited the increases in interest rates and continuing global inflation which is impacting Atlas’s coast of capital. They write that they believe Atlas would be more nimble as a private platform prepared to address current market issues while pursuing long-term market opportunities. They cite the immediate “implications of the prevailing macroeconomic weakness and rising cost of capital on Atlas’ business, cash flows and valuation.”
Other issues that they are highlighting for the special committee to consider are continuing declines in vessel charter rates. While most of Seaspan’s vessels operate on long-term charters, they point to the danger that customers might seek to use their own vessels as container volumes decline or the pressures on renewing charters. They also point to the dramatic increases in capacity in the sector in 2023 and 2024 citing data from Alphaliner saying that the orderbook represents 28 percent of existing capacity in the market. They say that over 5 million TEU of capacity is due for introduction in 2023 and 2024 with gross fleet capacity expected to increase a record 8.2 percent significantly exceeding a less than 3 percent increase expected in throughput.
Seaspan working with its customers moved aggressively in 2021 and earlier this year placing orders for new construction. Earlier this month they showed the first setback in the expansion strategy reporting they had suspended a deal valued at more than $500 million to build four vessels due in 2024. Seaspan as of mid-year was expecting four deliveries this year followed by 23 in 2023 and 40 in 2024. The company further reported better than 98 percent utilization in the second quarter of 2022 and just over three percent of its fleet due to come off charter by the end of 2024. Seaspan strategically divested smaller ships from its fleet in 2022 but in the second quarter reflected $1.2 billion in net debt for vessels under construction.
The investment group headed by David Sokol continues to seek an agreement for the proposed transaction. They said they will withdraw the offer if the special committee of Atlas’ board decides the offer is not full and fair and in the best interest of the shareholders.
