Overview
Shares of TOP Ships Inc. (NASDAQ:TOPS) rose 8.8% in premarket trading on Monday after the company disclosed a transaction to acquire nine newbuild ECO Medium Range (MR) product/chemical oil tankers through the purchase of the special purpose vehicles that own the shipbuilding contracts.
Deal mechanics
TOP Ships has entered into an agreement with an entity affiliated with its Chief Executive Officer to buy nine Marshall Islands companies. Those companies hold shipbuilding contracts for nine 47,499 deadweight ton (dwt) MR product/chemical tankers to be built by Guangzhou Shipyard International Company Limited. The vessels are scheduled for delivery in 2028 and 2029.
Charter employment and revenue backlog
The seller has secured time charter employment for all nine vessels with a major oil trader, commencing at delivery. Each charter is for a firm seven-year period, with the charterer holding an option to extend for an additional four years. Including the optional extension years, the contracts represent total potential gross revenue backlog of approximately $679 million.
Purchase price, approvals and fairness review
TOP Ships agreed to acquire the shares of the special purpose vehicles for an aggregate purchase price of approximately $41 million. Because the seller is affiliated with the company's CEO, the transaction was reviewed and approved by a special committee made up of independent members of the board of directors. That committee obtained a fairness opinion from an independent financial advisor regarding the consideration.
Financing and conditions
The special purpose vehicles are finalizing lease financing arrangements with two major Chinese leasing companies, including ABC Financial Leasing Co., Ltd. or its controlled entities. Those financing agreements are expected to cover the majority of the shipbuilding contracts' price for all nine vessels. The acquisition remains subject to the conclusion of these financing arrangements and the issuance of customary refund guarantees.
Market context
The company presented the transaction terms and the related approvals and financing steps as conditions necessary to complete the acquisition. The securities market reaction reflected investor interest following disclosure of the contracted employment and the material potential backlog tied to the nine vessels.