Seacor Holdings Statement Regarding Pending American Industrial Partners Tender Offer
SEACOR Holdings Inc. released the following statement today:
This response is to the January 11, 2021 letter from T. Rowe Price (hereinafter “T. Rowe”) addressed to our Board of Directors regarding the pending tender offer (the “Offer”) by American Industrial Partners (“AIP”) to acquire 100% of the shares of SEACOR Holdings Inc. (“SEACOR”), and explains why SEACOR disagrees with T. Rowe’s conclusions and why the Board continues to recommend that SEACOR’s stockholders accept the Offer.
The Offer is the result of a robust process in which our Board engaged a financial advisor to develop and consider a full range of strategic alternatives, including a stand-alone strategy. This process culminated in a competitive auction with numerous potential financial and strategic parties involved. The Offer price reflects active price negotiations with AIP that ultimately resulted in AIP improving its final bid.
The SEACOR Board looked beyond current financial performance and economic conditions in evaluating the Offer price, and carefully considered SEACOR’s long term prospects in assessing its value. As part of this process, the Board undertook a detailed and exhaustive review of SEACOR’s diverse businesses, and considered a five-year financial plan developed by SEACOR management. The plan included a forecast of both the expected cash flows to be generated by the businesses and the capital expenditures necessary over this five-year period. The review also focused on the assumptions behind, and risks and potential upside to, the forecast. Notably, the plan assessed the near-term weakness in financial performance linked to the pandemic. The forecast anticipated a strong recovery in general economic conditions and improved fundamentals for SEACOR’s cyclical industries. The plan presented to the Board assumed meaningful EBITDA improvement, from $92 million in 2020 to $144 million in 2024, an 11.9% compound annual growth rate.
In weighing all possible strategic alternatives – including a stand-alone strategy that might pursue acquisitions, divestitures of assets or business lines, sale lease-backs, share repurchases or increasing use of financial leverage – the Board concluded that selling SEACOR could create the most value for SEACOR stockholders. Based on the expected future performance of SEACOR’s businesses, the Board concluded that a sale for an all-cash price of $41.50 per share would represent an attractive price and deliver immediate value for SEACOR’s stockholders.
In its letter, T. Rowe expresses surprise that the Offer price does not represent a premium to SEACOR’s book value, particularly because some assets are carried on the Company’s books for less than might be realized if they were sold separately. It is important to understand that selling whole divisions or core assets is different from disposing of a few discrete assets. The Board carefully considered sales of assets or business lines as part of the strategic review process and concluded that the significant time, overhead expense and exposure to risk that would be required to do so made it an inferior alternative to selling the entire company.
T. Rowe’s letter references two over age bulk carriers that survived longer than their anticipated useful life as examples of assets that have potential to contribute more cash flow than would be expected from their de minimis book value. These vessels actually are an example of why there is no predictable or “steady state” EBITDA for a company with SEACOR’s complex asset portfolio. One of those ships was scrapped last year after generating negative cash flows, and the second one will most likely be scrapped this spring.
In summary, the recommendation of the Board of Directors that SEACOR’s stockholders accept the Offer price of $41.50 follows careful consideration of all options for optimizing value for stockholders and is underpinned by an in-depth analysis of future cash flows.
Source: Seacor Holdings