Greek oil tanker company Capital Product Partners L.P. (NASDAQ:CPLP) plans to buy smaller rival Crude Carriers Corp (NYSE:CRU) for about $281.3 million in all stock, a rare deal in the sector that has seen huge erosion of pricing power caused by vessel oversupply.
Too many tankers and a fragile economy have hurt top tanker operators, including Frontline(NYSE:FRO), Teekay (NYSE:TGP), Crude Carriers, Nordic American Tanker Shipping(NYSE:NAT) and Overseas Shipholding (NYSE:OSG).
This has also hit their shares, presenting those with deep pockets opportunities to buy cheap assets. Crude Carriers stock has fallen more than 25 percent in the last six months.
Each Crude Carriers share would be swapped with 1.56 units of Capital Product -- or $17.58 a share -- which is 35 percent more than the stock's Wednesday close of $12.99.
Crude Carriers trades its vessels in the high-risk-high-gain spot market.
The deal will make Capital Product the eighth-largest U.S.-listed tanker shipping company by tonnage, Crude Carriers said in a statement.
Capital Product said the purchase would add to its distributable cash flow. It currently pays a distribution of $0.2325 per quarter.
Evercore Partners advised Capital Product while Jefferies & Co. was the financial adviser to Crude Carreirs.
Crude Carriers shares were up 12 percent at $14.58 in early morning trade on Thursday on the New York Stock Exchange. Capital Product units, on the other hand, were trading down 10 percent at $9.90 on Nasdaq.