Capital Product Partners (CPLP) has signed a $1.65bn definitive transaction agreement to spin-off its crude and product tanker business into a separate publicly listed company, which will merge with subsidiaries of DSS.
Following the spin-off, CPLP will continue as a master-limited partnership supported by medium to long term charters producing stable cash flows in the container sector.
The new company, which will be known as Diamond S Shipping, will have an asset portfolio of the combined product and crude tanker fleet of CPLP and DSS, totalling 68 tankers (52 product tankers and 16 crude tankers), with an average age of 7.8 years.
With headquarters in the US, Diamond S Shipping is expected to have post-close net debt to the fleet value of about 60% and total liquidity of more than $90m.
Diamond S Shipping CEO Craig Stevenson said: “This transaction will occur at an opportunistic time in the cycle and creates one of the largest, highest quality fleets and best capitalised public shipping companies in the market.
“We are confident that this unique combination will create significant shareholder value through the cycle by using our cash flow to invest in the business via acquisitions and returning capital back to our shareholders.”
Under the transaction, CPLP will receive $23m in consideration in the form of about 3% incremental ownership in the new company.
The company unitholders will initially own approximately 33% and DSS equity owners will own approximately 67% of Diamond S Shipping.
After the transaction concludes, CPLP intends to affect a reverse unit split.
Diamond S Shipping will combine the technical expertise of CPLP’s fleet’s existing manager Capital Ship Management and DSS’ cost-effective operating structure.
Capital Ship Management will continue to provide commercial and technical management for the crude and product tankers contributed by CPLP to the new company.
As part of the transaction, CPLP will contribute its product and crude vessels, $10m in cash, as well as related inventories to Diamond S Shipping.
Completion of the transaction is subject to certain conditions, including the SEC declaring effective Diamond S Shipping’s registration statement, filing and approval of the company’s listing application, and the availability of net proceeds from committed debt financing in the amount. It does not require a vote of the holders of CPLP’s common units.