Sunday, October 01, 2006

Hit #116 (Maritrans)

Maritrans (TUG), an oil/pertroleum shipper, is being acquired by Overseas Shipholding Group for $453 million in an all-cash transaction. The offer, of $37.5/share makes for a gain of 73% over my average cost per share of $21.67.

While the takeover and the premium are welcome, I did not see Maritrans as a target, nor did I expect to see a consolidation wave in the shipping sector anytime soon.

The takeover makes sense for OSG which mostly has its operations outside the US. Maritrans is a US-only operator, and with this takeover, OSG now has a significant share of the US market.

I have been buying shares of a few others in the beaten-down shipping sector over the last few months. After what looked like a golden-era of shipping leading to a flood of public offerings, shipping stocks tanked starting late last year. I used the opportunity to buy into such companies as Seaspan (SSW), Diana Shipping (DSX), Genco Shipping (GSTL), Quintana Maritime (QMAR) and Eagle Bulk (EGLE). These also pay large dividends, and unlike the bigger operators, that are expensive due to heavy following on Wall Street, were marked down substantially.

Shipping has always been a notoriously cylical sector, with the past downturns being brutal, taking down a number of companies. Any future downturn will not be much different, as most of the players operate with huge debt loads. For that reason, I may decide to sell some of my holdings as and when opportunities present themselves.

Previous hit - Serono (#115)


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