SHIPPING mergers & acquisitions could increasingly favour stock-for-stock transactions over cash deals, banking representatives has told the Marine Money conference in New York. Stock-for-stock transactions could be driven by a variety of catalysts, including credit-access issues, covenant breaches, counterparty defaults and a greater willingness to sell among investors, Citigroup managing director Loli Wu told the conference yesterday.
This view was supported by Deutsche Bank Securities managing director Craig Fuehrer, who noted that boards are becoming much more risk averse, making cash transactions that require higher leverage less attractive. “We’d hope [stock-for-stock] deals would happen out of their strategic merits, but many will happen out of necessity,” Fuehrer predicted. Unsolicited approaches may have more resonance with boards in the current environment, explained Wu.
Highly conditional deals involving restructured debt terms could also have more appeal to boards and their lenders. Boards have a duty to evaluate proposed offers, even when the principal owner is averse to sale. “Just as boards are more risk averse in terms of leverage, they’re also more risk averse when it comes to having the spotlight on then for not taking their proper fiduciary responsibility,” Fuehrer said. He also noted that the depressed share price environment increases that pressure.
Source: Fairplay
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