Genco Shipping Rejects Diana Shipping’s Takeover Bid
Genco Shipping & Trading, a prominent player in the dry bulk shipping sector, has firmly rejected a revised takeover proposal from Greece’s Diana Shipping. The all-cash offer of $23.50 per share, which targets shares not already owned by Diana, was deemed insufficient by Genco’s board. The board, advised by a special committee of independent directors, stated that the proposal undervalues the company and poses significant execution risks. This decision comes shortly after Diana Shipping increased its initial offer from $20.60 per share and secured financing for the deal, partnering with Star Bulk Carriers to bolster its bid.
Diana Shipping currently holds approximately 14.8% of Genco’s shares and positioned its revised offer as a 31% premium over the undisturbed share price. However, Genco contends that this benchmark is outdated and fails to account for recent improvements in its earnings and asset values. The board expressed concerns regarding the valuation methodology used by Diana, noting that it selectively referenced the lowest analyst net asset value (NAV) estimate instead of the broader average, which exceeds the proposed offer.
Concerns Over Vessel Valuation and Execution Risks
A significant point of contention in the proposed deal is the sale of 16 vessels to Star Bulk Carriers, which Genco argues could lead to a “fire sale.” The agreed prices for these vessels are reportedly well below broker estimates, raising alarms about the potential loss of value for Genco’s shareholders. The proposed transaction includes a diverse fleet, featuring one Newcastlemax, six Capesizes, seven Ultramaxes, and two Supramaxes, with a total valuation of approximately $470.5 million.
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Additionally, Genco has raised concerns regarding the execution risks associated with the financing of the deal. While Diana claims to have secured $1.433 billion in committed funding, Genco pointed out that publicly disclosed commitments appear to total only around $1.1 billion. This discrepancy raises questions about the feasibility of the proposed transaction and its implications for Genco’s shareholders.
Despite the rejection of the current offer, Genco Shipping remains open to discussions on a proposal that accurately reflects its asset base, earnings profile, and the positive outlook for the dry bulk market. The ongoing exchange between the two companies marks an escalation in their takeover battle, with Genco previously suggesting a reverse transaction where it would acquire Diana, an approach that was not pursued.
