Canada Forest ups stake in Pac Basin

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Interest was mounting that Hong Kong-based dry bulk owner player Pacific Basin Shipping may be the target of a possible takeover after a Canadian vessel owner and commodity company increased its stake in the business from 5.2% to just under 9.4%.

The move by Canada Forest Navigation is understood to be the most substantial ownership interest taken by a vessel owner/operator since Pacific Basin listed in 2004 (excluding founding shareholders). According to market sources, Pacific Basin has virtually 100% free float and no controlling shareholder. In addition, it has a sizeable concentration of modern handysize vessels.

However, market analysts suggested that any additional share buying move by the Canadian business would only happen if the Pacific Basin share price doesn’t rise substantially. UBS Securities Asia, said: “In our view, we think it is unlikely that CFN will increase its stake substantially in the face of share price rallies. The presence of CFN will provide share price support, in our view, especially at levels near HK$3.40, which is our estimate of break-up value.”

Canada Forest Navigation is a private company that has a subsidiary Canfornav Inc, which is a vessel operator/owner with a fleet of over 30 handysize vessels. Operations are focused on trade between Great Lakes and Europe/Mediterranean, US Gulf, and central and south America.

According to market sources, the CNF group has 21 handysize vessels on order for delivery in 2009-2010 from shipyards including Jiangsu Eastern, Weihai Shipyard, Wuhu Shipyard, and Shanghaiguan Shipyard.

Given the age profile of the global fleet, market analysts believe it would be difficult to acquire a similar sized fleet via the second-hand market.
UBS Securities Asia added: “Notwithstanding the above, we believe CNF is unlikely to significantly increase its interest in PBS if the share price increases significantly. Cheap second-hand vessels (perhaps in handymax/supramax size categories) or new buildings slots for handysize vessels may provide an attractive alternative investment.”

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