MPC Container Ships ASA is pleased to announce that it has entered into a share purchase agreement to acquire Songa Container AS (“Songa”) for an aggregate purchase price of USD 210.25 million on a debt and cash-free basis (the “Transaction”).
Upon closing of the Transaction Songa’s fleet will comprise 11 container vessels with an average size of 2,250 TEU and an average age of 11.9 years (the “Songa fleet”) under the assumption of Songa having completed the sale of its vessels Songa Haydn, City of Hong Kong and FS Ipanema. Nine of the acquired vessels are fitted with scrubbers while three are equipped with the highest ice-class and hence well suited for Baltic trades.
Authority comments
The structure of the transaction creates an immediate and accretive impact to the earnings in a container market Constantin Baack, Chief Executive Officer of MPC Container Ships ASA commented, “This transaction is backed by our strong belief in the sustainable container market fundamentals and the desire to take advantage of the significant lag between asset values and rates. The structure of the transaction creates an immediate and accretive impact to our earnings in a container market that continues to strengthen by the day.”
Strengthening position
With the Transaction, MPCC aims to reinforce its position as the leading intra-regional container tonnage provider with a combined fleet of 75 ships and a total capacity of ~158,000 TEU. The Transaction will add significant scale and operating leverage to the MPCC platform in a persistently strong container market, with rates, charter durations and asset values strengthening on a continuous basis.
“We are pleased to welcome renowned shareholders like Arne Blystad, Canomaro Shipping and Klaveness Marine to MPCC. This is a milestone transaction for MPCC and we are particularly excited about the cash flow prospects of the combined fleet which will come to the benefit of our existing and new shareholders in the coming years,” CEO Constantin Baack added.
An investor call will be hosted on Wednesday 23 June at 10:00 CEST. Please see below for call-in details.
EBITDA backlog
The Songa fleet has an estimated EBITDA backlog of USD 22.5 million with an average charter length of about 9 months. On a proforma basis MPCC currently expects revenues for the combined fleet in the range of USD 290-315 million and an EBITDA in the range of USD 170-180 million for FY 2021.
The MPCC fleet is positioned to potentially generate an EBITDA of above USD 350 million for 2022
Based on the combined charter portfolio and assuming charter renewals at around current market rates and periods, the MPCC fleet is positioned to potentially generate an EBITDA of above USD 350 million for 2022, with USD 70-75 million of this generated by the Songa fleet. On the basis of the same assumptions for 2023 EBITDA for this year could exceed USD 450 million with USD 80-90 million generated by the Songa fleet.
Purchase price settlement
It is agreed that approximately USD 115 million of the purchase price (taking into account Songa’s cash and net working capital) will be settled in cash. This amount includes the refinancing of the outstanding debt.
The remaining portion will be settled by way of issuing approximately 48-50 million new shares in MPCC (based on an economic effective date of the Transaction of 31 May 2021 when a mutual understanding of the main terms of the Transaction was reached between the parties and a closing price of the MPCC share of NOK 17.34). Such consideration shares in MPCC shall be of the same class as MPCC's ordinary shares and shall be listed on the Oslo Stock Exchange, and subject to a customary lock-up agreement for a period of 3 months from completion of the Transaction.
The transaction is expected to be completed by the end of July 2021
In relation to the cash consideration, DNB Bank ASA has committed to providing a USD 127.5 million acquisition facility with a 2-year tenor and effective interest rate of 500 bps plus Libor.
The transaction is subject to customary conditions for completion and is expected to be completed by the end of July 2021.
Shareholders comments
Arne Blystad, Chairman of Songa Container AS commented, “The container market continues to be strong and MPCC has become a compelling reflection of the underlying container market fundamentals. We are happy to contribute to the consolidation in the container market and build a leader in the regional container segment. Prior to this transaction, we were already a shareholder in MPCC and we will become a more significant one post this transaction.”
DNB Markets acted as lead advisor for MPC Container Ships ASA and Songa Container AS on the Transaction while Clarksons Platou Securities AS and Fearnley Securities AS acted as joint M&A advisors to MPC Container Ships ASA. Advokatfirmaet Thommessen AS has acted as legal deal counsel in respect of the Transaction.
