When London-listed Taylor Maritime Investments floated a $26-per-share cash tender offer for Singapore-based Grindrod Shipping on Monday, the word that stood out was “cash”. Cash simply has not been the main currency used in the past few years to achieve consolidation in the bulker sector. In a twist on the old cliche, shares have been king. “All-cash tender offers are exceedingly rare in shipping,” a ship-finance source said. “It’s similar to someone willing to pay all cash for your house in the real estate market.” In an increasingly uncertain climate for the once-rampaging dry bulk sector, with listed bulker owners having bled hundreds of millions of dollars in share value since June, a question emerges: is the Taylor-Grindrod bid a one-off, or reflective of a paradigm shift in the trade’s mergers-and-acquisitions game? Streetwise found some disagreement on the point, with one well-connected source maintaining there are peculiarities around the deal that warrant caution about declaring a larger trend. We will get back to that view. However, another experienced financier argues that the winds have shifted. “I think paradigm shift is exactly the right way to put it. It’s become much more difficult for a buyer to issue shares in a deal done on a NAV-to-NAV basis given how far share prices have fallen off since the peak of the market in the spring,” he said, referring to net asset value (NAV).

In the current Taylor-Grindrod example, TradeWinds had reported in April that the Singapore-based owner was in play with a pack of public companies, including the likes of US-listed Eagle Bulk Shipping and Genco Shipping & Trading, believed to be in hot pursuit. “You can imagine in that example that if Company A had made a shares-based offer to Grindrod in April or May, while its shares were trading at a robust, market-peak level, that the offer would have become a lot less attractive over the intervening months as those shares lost much of their value,” the source said. According to Jefferies equity analyst Omar Nokta, the dry bulk group under his coverage traded at an average of 90% of their NAV at the market peak in late May. Today, the same group is trading around 60% of NAV. He said every dry owner in the Jefferies group is below NAV. Using the two US shipowners believed to have pursued Grindrod, shares of Eagle Bulk reached a high of $78.75 on 6 June and were around $43.50 on Wednesday, a decline of 45%. Genco’s stock peaked at $27.15 on 6 June and was trading near $13.70 on Wednesday, a fall of about 50%.

The use of shares to buy up companies or fleets has been employed most effectively by New York-listed Star Bulk Carriers. Since 2018, Star Bulk has struck successive deals with Songa Bulk, Augustea Atlantica, ER Capital, Delphin Shipping and the former Scorpio Bulkers, each time acquiring either a full fleet or, in Scorpio’s case, a seven-vessel en-bloc deal. Each time, Star Bulk has used a blend of its own shares alongside cash as payment. Each time, Star Bulk issued that stock at NAV or above. The result is a 128-ship goliath. But the Greek giant is not alone. Others to have used shares in acquisitions include Eagle Bulk, Pacific Basin and even Scorpio Bulkers before its about-face from the dry trade into offshore wind power and rebranding to Eneti. In early August, Greece’s Diana Shipping joined that crowd, doling out shares for about one-third of the purchase price of nine ultramaxes from Sea Trade Holdings. However, Diana was publicly criticized for issuing those units well below NAV. Following a similar course will likely loom as unattractive for many of Diana’s peers. Still, whether the big NAV discounts are short term, or something longer depends much on one’s view of the dry bulk market. Is it set to recover into 2023 with upside prospects fueled by vessel supply that could shrink? Or is there longer-term worry based on prospects for a global recession? A second finance man sees the former and, thus, discounts a new “cash is king” climate as anything long-standing. He also told Streetwise that Grindrod may simply have preferred a cash offer, not least because of the messiness inherent in it having shareholders in both South Africa and New York, with Taylor being a closed-end trust in London. One thing that seems clear is that there is a story to the pursuit of Grindrod that is yet to have fully come out in the wash. But when it does, there will be more to it than a simple cash tender from Taylor. No doubt there were other offers, involving both cash and shares, building up to the Taylor bid sitting on the table in a big green pile.