DryShips agrees to buy OceanFreight in shipping merger

In a move designed to increase its large ship fleet, Greece-based Dryships Inc. agreed to purchase smaller rival OceanFreight for $118 million.

Dry cargo shipper OceanFreight owns four capesize and two panamax vessels with tonnage totaling 859,622 tons. The fleet has a relatively young age, averaging about six years.

DryShips is also on the verge of buying five Very Large Ore Carriers (VLOC), with a combined deadweight tonnage of about one million tons.

Capesize ships are a larger size of dry bulk vessels, and DryShips certainly had a need in that area. Currently, just 9 of its 37 ships are capesize, which are ideal in coal and iron transport to growing nations China and India.

Capesize ships are currently valued at $20 million, while panamax vessels are valued slightly lower at $16 million.

“The merger with OceanFreight offers us a unique opportunity to renew DryShips fleet, increase our presence in the capesize, VLOC sector and augment our fixed revenues,” DryShips CEO George Economou said in a statement.

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The deal was made possible because DryShips had sold eight older vessels since last year, replacing acquired vessels or fleets with set financing plans in place. The newest acquisition is expected to close in the fourth quarter.

“Bulkers older than ten years will likely be the hardest hit as charterers prefer newer tonnage when available, and the long remaining useful life on younger ships can substantiate a premium valuation,” Deutsche Bank analyst Justin Yagerman said in a note to Reuters.