Bugbee: Maersk family will drive tanker consolidation

Tanker

Scorpio Tankers CEO Robert Bugbee, one of most high profile chief executives in the sector, welcomes the news of the Maersk family’s acquisition of almost 100-year-old carrier Maersk Tankers.

We would very much like to see the Maersk family as a driving and consolidating force. We expect they will be”

— Robert Bugbee

In addition to being one of the most well-known individuals in the tanker sector, he also never shies away from speaking his mind, which in some corners makes him a somewhat controversial figure.

In any case, Maersk Tankers CEO Christian Ingerslev will largely be competing against Bugbee, after the New York/Monaco-based carrier recently merged with Navig8, another US-based product tanker carrier.

The merger created a new major player in the segment with a fleet of more than 100 vessels.

Bugbee has for a long time said that the sector needs consolidation in order to achieve a healthy long-term financial state. Even though the product tanker carriers benefited from the oil downturn, which made cargo volumes soar, a far too big global fleet has resulted in carriers suffering deficit after deficit this year.

Add to this the fact that the industry is fragmented into too many too small carriers.

Expects that the family will lead trend

As such, Bugbee hopes – even expects – to see the Maersk family, with its purchase of Maersk Tankers, spearhead a large-scale consolidation drive, he tells ShippingWatch.

“I think this is great for the product industry. They are a first class outfit, with shareholders clearly believing in the product market. I would expect this simply to be a first step, and I would now expect them to use their platform and clear shareholder motive to expand Maersk Tankers through acquisitions and mergers.”

He had figured that the efforts to spin off Maersk Tankers, as is the case for the other companies in the Energy division, would result in a model that would see the family maintain at least a majority stake in the carrier.

Either a sale, as the one that wound up happening, or an IPO or a merger with another tanker carrier, with the family maintaining control.

“We would very much like to see the Maersk family as a driving and consolidating force. We expect they will be,” says Bugbee.

“It will definitely motivate others to look more seriously at the opportunities in consolidation,” Hafnia Tankers CEO Mikael Skov told ShippingWatch after the merger between Scorpio Tankers and Navig8 was announced earlier this year. PR photo: Hafnia Tankers.

Pressure on other carriers

He thus also notes that the Maersk family’s latest move puts pressure on the smaller tanker carriers, which have for some time now struggled to amass a size that will attract investors and create an opportunity for other companies “with shareholders that are less committed or strong,” and not least the carriers whose ownership includes equity funds which are looking for an exit for their investment.

We believe there are already discussions amongst and with some of the above mentioned companies”

— Robert Bugbee

This could be players from the group of product tanker carriers that counts Torm, Hafnia Tankers, Ardmore, and Diamond S.

“We believe there are already discussions amongst and with some of the above mentioned companies,” adds Bugbee.

He played a key part in kicking off the consolidation when Scorpio Tankers, before the summer, announced that the carrier would acquire competitor Navig8 and its fleet of 27 vessels. This move was seen by many as a guidepost for the sector.

Hafnia Tankers CEO Mikael Skov, for instance, told ShippingWatch the following after news of the merger broke:

“Something has happened now and it means that there is a data point. There’s valuation, investor interest, and other things to start looking at, and in many ways, this will provide answers to some of the questions that have emerged. It will definitely motivate others to look more seriously at the opportunities in consolidation.”

Canceled IPO plans

Hafnia Tankers and Danish peer Torm have both been eying New York IPOs for a long time, but both carriers lack the size needed to become truly attractive to major investors, while the product tanker market is currently in the doldrums.

BW Pacific also attempted an IPO in Oslo two years ago, but the carrier had to call off the process because of lack of investor interest.

Due to the merger with Navig8, Scorpio Tankers pushed back publication of its second quarter interim report. The report was thus published Monday this week and, as was the case for its competitors, the carrier booked a deficit for the first six months of the year. Scorpio Tankers lost USD 79.8 million in the period, compared to a profit of USD 31.9 million in the same period 2016.

English Edit: Daniel Logan Berg-Munch


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Torm and Hafnia are candidates in major merger wave

 


Scorpio Tankers merges with Navig8

 

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BY TOMAS KRISTIANSEN