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Eagle Bulk and Star Bulk announce landmark merger to create dry bulk behemoth

New entity to operate as Star Bulk Carriers Corp and led by Star Bulk chief executive Petros Pappas

Bulker owners Eagle Bulk and Star Bulk to combine, creating a 169-vessel dry bulk mammoth

US-listed bulker owners Eagle Bulk Shipping and Star Bulk Carriers have announced a landmark merger, combining their two companies into a 169-owned dry bulk behemoth with a pro-forma market capitalisation of about $2.1bn.

The all-stock merger on a net asset value (NAV) to NAV basis, which was unanimously approved by both companies’ boards, will see Star Bulk and Eagle shareholders own about 71% and 29% on a fully diluted basis, respectively.

The agreement stipulates that Eagle’s shareholders will receive 2.6211 Star Bulk common shares for each common Eagle share. This represents a total consideration of about $52.60 per share, a 17% premium on Eagle’s December 8 closing price of $44.85 per share, the companies said.

Star Bulk chief executive Petros Pappas said the combined fleet will generate “meaningful synergies” while investing in emission reduction.

“We will leverage both companies’ technical and commercial fleet management capabilities to optimize performance, deliver on our health, safety, and environmental objectives and maximize earnings potential,” Papas said in a joint statement announcing the combination.

“With a well-capitalised balance sheet, we aim to continue delivering strong cash returns to shareholders while investing in emission reduction technologies as we continue to pursue growth over the long term.”

The new entity will operate as Star Bulk Carriers Corp and will be led by the current management team of Star Bulk, joined by “certain” Eagle senior executives.

Star Bulk chief executive Pappas and board chair Spyros Capralos will continue in the same roles in the new entity, while one member of Eagle’s board will join the new board at closing.

Both companies will maintain their dividend policies until the merger, and Star Bulk expects to continue with its policy following the deal’s closing.

The move comes after both companies had recently repurchased significant stakes from US private equity giant Oaktree Capital Management.

“We have been focused on growing the company in order to improve our shareholder liquidity,” Papas told a webcast announcing the merger on Monday evening.

“With a substantially higher market capitalisation as a combined company, and with the share repurchase from Oaktree completed, we will further increase our size while growing trading liquidity and float.”

The transaction is expected to close in the first half of next year, subject to approval by Eagle’s shareholders, regulatory approval, and other closing conditions.

When asked about the views of Eagle’s two largest shareholders, box lessor Danaos Corporation and bulker owner Castor Maritime, Eagle chief Gary Vogel expressed confidence that they will recognise the merger’s value, but signalled he does not plan to discuss it with them individually.

“We just announced this an hour ago, but having said that, I’m not going to get into discussions with individual shareholders,” Vogel told the webcast.

“But we do believe that this transaction is in the interest of all of our shareholders, and I think the value proposition of creating the largest listed [dry bulk] company, and the synergy value proposition — we think all of our shareholders will see the value of that and in supporting this transaction.”

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