If you follow our coverage of Chinese bigwigs like PetroChina
Often, these parent companies sell assets to their publicly traded subsidiaries at sweetheart rates. It's basically a wash for the parent, when shares of the subsidiary soar on the announcement of such a deal. A recent occurrence in the dry bulk shipping sector is perhaps the most egregious to date.
China COSCO Holdings, one of the world's largest container shipping companies, has decided to bulk up by buying the dry bulk assets of its parent. These are the vessels that transport hot commodities like iron ore, coal, and grains. In total, China COSCO is picking up a fleet of 423 ships with 33.2 million deadweight tons (dwt) of capacity. In contrast, DryShips
Let's attempt to place a valuation on this target, which is the largest dry bulk fleet in the world.
A slew of dry bulk shippers are valued at around $900/dwt, including announced fleet additions. From DryShips to Excel Maritime
Using this rule of thumb, I would guess that China COSCO paid more than $30 billion. But that estimate doesn't take into account COSCO's fleet age or composition. About 200 of these ships are old, small Handymax and Handysize vessels -- not big, bulky babies.
Consider a recent transaction by Eagle Bulk Shipping
Try $4.6 billion. Yes, China COSCO is paying its sugar daddy all of $139/dwt for this gigantic fleet. In money-making terms, that's five and a half times six-month trailing net profit. Nice deal, if you can get it.
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