Flotilla of deals suggests fair wind for shipping

Private equity interest in the shipping and port logistics sector is on the rise, with more than $2bn of recent deals suggesting firms are increasingly drawn to infrastructure-related assets.

First Reserve Corporation brought in a group of investors to inject further capital into its portfolio company Diamond S Shipping on Monday, the latest in a slew of deals in the shipping and ports sector.
Turnaround group WL Ross & Co, sovereign fund China Investment Corporation, Canadian financial services company Fairfax Financial, investment manager Morgan Creek Capital Management and buyout house PPM America Capital Partners joined First Reserve in backing Diamond.

The consortium injected $600 million in equity into the company, according to a statement. The capital will be used in part to fund the acquisition of 30 ships from Hong Kong-based Cido Tanker Holding to add to the 10 tankers it has under construction in South Korea, it said.

Hong Kong-based private equity firm Bravia Capital, meanwhile, has partnered with Chinese logistics company HNA Group to acquire a sea container leasing business owned by industrial conglomerate General Electric. The pair will pay $1.05 billion for GE SeaCo, according to a statement, with Deutsche Bank and ING arranging debt financing. Bravia specialises in the transportation and logistics sector.
Bharat Bhisé, chief executive of Bravia, said: “This acquisition comes at a time when the global growth in marine container demand continues to grow on a long-term basis. Our investment in GE SeaCo is the latest of several successful shipping and aviation acquisitions over the past 18 months, and reinforces our position in transportation and logistics investments worldwide.”

Generalist buyout firms as well as transportation specialists like Bravia are also making investments in the sector however, suggesting the appeal of shipping and port logistics companies is growing.

Last week, the buyout arm of Canadian pension fund Ontario Municipal Employees Retirement System (OMERS) acquired Scottish shipping services company V.Group for $520 million. OMERS Private Equity bought the business from UK buyout firm Exponent Private Equity. It funded the deal using $280 million of leveraged loans arranged by RBC Capital Markets. Law firm Weil Gotshal advised OMERS PE on the buyout, with Allen & Overy advising Exponent and Travers Smith working for V.Group’s management.

Charterhouse Capital Partners is understood to have been in the running to acquire the business before withdrawing from the process according to press reports. Exponent had acquired V.Group for $338 million in 2007. Lazard ran the sale process.

Earlier in the year, US alternatives firm The Carlyle Group, private equity firm Tiger Group Investments and a consortium  of other investors formed a joint venture which they said would aim to invest $900 million of equity in $5 billion of shipping assets over the next five years.