The competition between two major companies in the dry bulk shipping industry heated up on Tuesday as Diana Shipping criticized Genco Shipping & Trading's board for refusing to negotiate. This comes after Genco blo...
The competition between two major companies in the dry bulk shipping industry heated up on Tuesday as Diana Shipping criticized Genco Shipping & Trading's board for refusing to negotiate. This comes after Genco blocked shareholders from taking advantage of Diana's recent cash offer to acquire the company.
In a strong statement, Diana responded to Genco's rejection of its cash offer of $24.80 per share. They urged shareholders to vote to replace six of Genco's directors at the upcoming annual meeting on June 18 and to accept Diana's offer directly.
This is the third time that Genco's board has turned down Diana's acquisition proposals. Diana, which is already the biggest shareholder in Genco, stated that Genco's refusal "clearly shows" that its directors are not interested in discussing a potential deal.
Diana's CEO, Semiramis Paliou, said, "Genco's announcement today makes it clear that the Genco Board is not willing to have a meaningful conversation about our proposal." She added, "Even though they made a vague statement about being open to discussions, their actions over the past six months say otherwise. The Genco Board does not seem interested in having a dialogue that could lead to a beneficial transaction for their shareholders."
Diana accused Genco of consistently ignoring their outreach attempts without offering any alternatives. They argued that Genco has been "refusing to engage, offering no counterproposal, and constantly changing the valuation criteria."
One major issue is the way Genco values its assets. Diana claimed its last two offers represented nearly the full net asset value of Genco based on evaluations from VesselsValue, a source Genco has used in past investor presentations for over five years. Recently, according to Diana, Genco has switched to using higher estimates from analyst firms to justify its refusals.
"Shareholders should consider this question: why has Genco suddenly stopped using VesselsValue — the independent valuation source it relied upon for years — and replaced it with analyst estimates it hasn’t shared before with shareholders?" the company stated.
Moreover, Diana pointed out that dry bulk shipping stocks, including Genco, have usually been traded below their net asset value. They noted that take-private transactions in shipping have generally occurred below NAV rather than at higher prices.
Diana claimed, "Adding a control premium to an already inflated NAV estimate seems designed to make any offer seem insufficient rather than achieve a fair outcome for shareholders."
The company remains open to discussions and has made three cash offers, providing a merger agreement that could be finalized quickly, and has directed a fully financed tender offer straight to shareholders.
"We have made three cash offers, presented a merger agreement ready to be signed soon, and launched a fully financed offer directly to shareholders," Paliou said. "Genco has only rejected engagement, leaving shareholders with a clear choice at the June 18 Annual Meeting: it’s time to elect six independent directors who will genuinely engage in discussions that shareholders deserve."
Diana also criticized Genco's shareholder rights plan, known as a poison pill, and noted that this measure has been revised again in response to investor concerns.
Additionally, Diana claimed that Genco has spent over $15 million defending against their campaign, including almost $2 million on new fairness opinions from Jefferies and Morgan Stanley.
"This misuse of shareholder funds is a direct loss of shareholder value," Diana stated.
This ongoing dispute is gearing up for an important shareholder vote on June 18, when investors will decide whether to back Diana's six independent director candidates. Diana's tender offer remains open until June 26.
This battle has become one of the most closely watched takeover fights in the shipping industry, pitting two significant publicly traded dry bulk companies against each other.