* To pay $11.25, 0.52326 unit share for each OceanFreight
* Deal, expected to close in Q4, to raise DryShips' big ship
(Adds details in paragraph 2, 3, 5 and analyst quote in para
By Krishna N Das
BANGALORE, July 26 DryShips Inc , a
Greece-based dry cargo shipper, said it would acquire smaller
rival OceanFreight Inc for $118 million to increase
the number of large ships in its fleet when asset prices are
The Baltic Exchange's main sea freight index , which
tracks rates to ship dry commodities, has lost over a quarter of
its value this year as vessel oversupply outpaces demand to ship
This downturn has sent average vessel prices down 65 percent
from 2008 all-time highs. A capesize ship is currently valued at
$20 million, while a panamax would cost $16 million.
OceanFreight owns four capesize and two panamax vessels with
an average age of six years and tonnage of 859,622 tons. It has
also contracted to buy five Very Large Ore Carriers (VLOC) with
a combined deadweight tonnage of about one million tons.
In contrast, just 24 percent of DryShips' fleet of 37 ships
is capesize, the bigger class of dry bulk ships.
Capesizes and panamaxes are ideal to transport coal and iron
ore -- demand for which are being driven by China and India.
"The merger with OceanFreight offers us a unique opportunity
to renew DryShips fleet, increase our presence in the
Capesize/VLOC sector and augment our fixed revenues," DryShips
CEO said in a statement.
DryShips has sold eight older vessels since early last year
to replace those by acquiring vessels or fleets with fixed-rate
employment and financing in place.
DryShips would pay $11.25 in cash and 0.52326 of a share of
its drilling unit Ocean Rig UDW Inc , for each share
The deal, which is expected to close in the fourth quarter,
values OceanFreight share at $19.85 -- or 110 percent more than
the stock's Monday close of $9.47.
"Bulkers older than ten years will likely be the hardest hit
as charterers prefer newer tonnage when available, and the long
remaining useful life on younger ships can substantiate a
premium valuation," Deutsche Bank analyst Justin Yagerman said
in a note.
Evercore Partners advised DryShips while Fearnley Fonds ASA
served as the adviser to OceanFreight board.
Shares of DryShips edged 1 percent lower to $3.78 before the
bell on Tuesday. OceanFreight shares rose 83 percent to $17.35.
(Reporting by Krishna N Das in Bangalore; Editing by Gopakumar
Warrier, Prem Udayabhanu)