Tuesday, February 4, 2014

The Coming IPO Of Diamond S Shipping Group

A new year, a new shipping IPO by private equity investor Wilbur Ross. Following on the steps of the very successful IPO of Navigator Holdings Ltd. (NVGS) last November, Diamond S Shipping Group, Inc. (DSG) filed today a registration statement with the SEC for an initial public offering.

Diamond S Shipping Group, Inc. currently owns a fleet of 33 medium range (MR) product tankers. The company had acquired the first 30 vessels from CIDO for $1.165 billion in 2011. Last December Diamond S acquired an additional three vessels from CarVal (an investment arm of Cargill, Incorporated) for $83.7 million. 

The IPO is intended to finance part of the acquisition cost of ten MR new-building vessels, currently under construction in Korea. The vessels will be delivered from September 2014 through January 2016. Diamond S has agreed to pay $380 million for the ten new-building vessels, and intends to raise $190 million, or 50% of the purchase price, in the upcoming IPO.

I have just started peering through the 206 page-long registration statement. I intend to follow-up with a complete analysis and valuation in the coming days. Until then, I would like to make the following observation:

The consortium of private investors led by WL Ross & First Reserve first committed $1 billion in equity to Diamond S Shipping Group in August 2011. The equity infusion was meant to finance the acquisition of the 30 MR tankers from CIDO, plus the construction cost of ten new-building vessels (eight Suezmax and two LR2 product carriers), that Diamond S had already ordered.

Those ten vessels, which have since been delivered to the company, are conspicuously absent from the upcoming IPO. Diamond S has decided to market itself as a pure MR play. Given the buzz surrounding medium range product tankers on Wall Street these days, I cannot blame them.

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