Tuesday, November 11, 2014

HORIZON LINES & MATSON & PASHA

Newsflash: Horizon Lines to be broken up, sold to Matson, Pasha

Matson will expand into Alaska while Pasha will acquire Horizon's Hawaii business.

Horizon Lines, the largest Jones Act container carrier, is being broken up and acquired by Matson Line and Pasha. Horizon had been the only domestic carrier with container liner services to Alaska, Hawaii and Puerto Rico, and could trace its roots to Sea-Land Service, the original container service started by Malcom McLean.
Matson, which today has services to Hawaii, Guam and an eastbound service from China to the U.S., will expand into a new market, acquiring Horizon’s Alaska service.
Horizon’s Hawaii operation will be sold to Pasha, a privately-owned San Rafael, Calif.-based company that several years ago started service using a roll-on, roll-off service between San Diego and Hawaii, and is building a new container/roll-on, roll-off ship for the trade.
Horizon said it plans to discontinue its service between Jacksonville, Fla., and San Juan, Puerto Rico, due to continuing losses without the prospect of future profitability.
Under the Matson agreement, Matson will acquire all outstanding shares of Horizon Lines for $0.72 per share in an all-cash transaction. The acquisition price represents a premium of approximately 89 percent over Horizon's closing stock price on Nov. 10.
The Matson agreement has been unanimously approved by Horizon's board of directors. Horizon shareholders representing 55 percent of the fully diluted equity, which also represents 41 percent of the outstanding voting common stock on Nov. 11, have agreed to vote their shares in support of the transaction.
Under the Pasha agreement, Pasha will acquire Horizon Lines' Hawaii trade lane business, prior to the closing of the Matson agreement, for approximately $141.5 million in cash. The proceeds from the Pasha transaction will reduce Horizon Lines' debt obligations prior to closing of the Matson transaction, at which time Matson will acquire all of the outstanding shares of Horizon Lines and repay the remaining debt outstanding at closing.
The Pasha agreement has also been been unanimously approved by Horizon's Board of Directors.
As a result of the transactions, Matson, Inc., will acquire all of Horizon Lines' business operations, except for the Hawaii trade lane business.
Horizon said the two transactions taken together are valued at approximately $598 million on an enterprise value basis. Matson will fund its transaction from available borrowings under its bank credit facilities and existing cash on hand.
Pasha will fund its transaction from a committed debt financing agreement. There are no financing conditions to either transaction.
David N. Weinstein, chairman of the board of Horizon, said, “Both Matson and Pasha are well-positioned to serve our valued customers."
"The acquisition of Horizon's Alaska operations is a rare opportunity to substantially grow our Jones Act business," said Matt Cox, president and chief executive officer of Matson. "Horizon's Alaska business represents a natural geographic extension of our platform as a leader serving our customers in the Pacific. We expect this transaction to deliver immediate shareholder value through earnings and cash flow accretion via significant cost and operating synergies.
"We are also encouraged," he continued, "by the long-term prospects of the Alaska market, which mirrors Hawaii in many operational ways, despite different underlying economic drivers. Both markets depend on reliable, superior and timely container cargo service as part of vital supply lifelines — hallmarks of the Matson brand."

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