Transportation & Logistics Services

2011 Maritime M&A Year in Review

The McLean Group | 7900 Westpark Drive, Suite A320 | McLean, VA 22102 | (703) 827-0200 | www.mcleanllc.com

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Transportation & Logistics Services 2011 Maritime M&A Year in Review

I. LOOKING BACK ON 2011

In 2011, The McLean Group published two semi-annual

reviews on North American M&A activity in the Maritime

sector. In this report, we take a brief look back at 2011,

and discuss current domestic and international deal trends.

To read past publications, please visit “News & Events” at

The McLean Group’s website: www.mcleanllc.com.

II. SHIPPING ENVIRONMENT

The 2011 economic environment for ship owners and operators was difficult as dry bulk, container and tanker segments

alike remained burdened by overcapacity and low rates as reflected in chart provided below. Following a brief 2010

recovery, container lines began hemorrhaging again, posting combined losses exceeding several billion dollars. Trailer

Bridge, the integrated trucking and shipping cargo line founded by containerization pioneer Malcolm McLean, filed for

bankruptcy in November 2011 while many containership operators worldwide announced substantial losses for the year.

Yet despite continued uncertainty and an import/export imbalance, the Drewry Container Rate Benchmark rebounded in

late 2011 and early 2012, signaling near-term stabilization and, quite possibly, recovery.

Tanker companies have struggled industry-wide. General Maritime filed for bankruptcy in November 2011 and OSG

suspended its dividend in February 2012. Turnaround investors are becoming active in this environment: Oaktree Capital

invested $175 million in equity to reorganize General Maritime following its bankruptcy. Meanwhile, turnaround artist

Wilbur Ross’ WL Ross & Co. invested $62.5 million in struggling petroleum shipper Navigator Holdings LTD.

Inside This Issue:

I. Looking Back on 2011 1

II. Shipping Environment 1

III. Positive Signs from the Oil Patch 2

IV. Worldwide Maritime M&A Trends 2

V. Outlook 3

One-Year Trends: Offshore, Container, Bulk and Tanker Public Company Indices

Offshore/Inland Petrochemical Index Bulk Shipping Index

Containership Index Petroleum Tanker Index

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Transportation & Logistics Services 2011 Maritime M&A Year in Review

Since reaching 12,000 in 2008, the Baltic Dry Index, a measure of oversea raw material transportation costs, has plunged to

706 as of late February 2012, signaling continuing difficulties for dry bulk shippers worldwide. Insofar as such indices are

lagging indicators, such industry experts as Dennis Gartman, editor of The Gartman Letter, see opportunity ahead for savvy

investors in the dry bulk segment. Genco Shipping & Trading (GNK), which acquired five new handy-size dry bulk carriers in

November 2011, has seen its stock price appreciate 20.5% year-to-date through February 21.

III. POSITIVE SIGNS FROM THE OIL PATCH

Transportation and oil and gas related services continue to drive much of the US and Canada maritime market. As drilling

permits and equipment orders recover in the Gulf region, related maritime economic activity should continue to increase.

Publicly-traded liquid barge carrier Kirby Corporation (KEX), was a notable buyer in 2011, completing several acquisitions

including: K-Sea ($600 million), Enterprise Marine’s liquid barge fleet ($53 million) and United Holdings, an engine and

equipment provider ($270 million).

2011 was a busy year for US midstream oil and gas transactions. Limited partnership Genesis Energy LP acquired Florida

Marine Transport (FMT) black oil transportation fleet ($141 million) as a bold-on for its Supply & Logistics division. A

number of port and terminal asset acquisitions closed. For example, Martin Midstream Partners LP and private equity

group Lindsay Goldberg acquired critical properties to position themselves for growth in midstream energy transportation.

IV. WORLDWIDE MARITIME M&A TRENDS

In North American and international markets alike, the majority of M&A transactions involved “shore-side” assets and

providers of maritime products and services. In 2011, M&A activity continued to recover worldwide even though total deal

counts have yet to return to 2007 pre-recession levels. The charts below show the post-2007 increase in global maritime

transactions and 2011 deals segmented by sector and country, respectively. Russia climbed to the top of the five most

active nations in worldwide maritime M&A by tripling 2010 M&A transaction levels. Companies and investors there are

positioning themselves to capitalize on increased North Sea Route traffic polar ice along the northern coastline of Russia

and Siberia retreats.

Worldwide Maritime M&A Deals Closed 2007-2011

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Transportation & Logistics Services 2011 Maritime M&A Year in Review

M&A activity has increased worldwide in the past two years, but deals primarily remain intra-regional with intra-national

buyers and sellers. The following table illustrating the deal breakdown among the world’s top three regions indicates that

most transactions are closed between buyers and sellers in the same region.

SELLER

Europe Asia Pacific US and Canada

BUYER

Europe 110 6 3

Asia Pacific 3 40 1

US and Canada 3 1 24

Russia 55

United States 28

Norway 12

China 11

United Kingdom 10

2011 Maritime M&A Deals by Industry Segment

2011 Worldwide Maritime M&A Deals by Region, Buyer and Seller

Top 5 Countries 2011 Sell Side Deals Completed

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Transportation & Logistics Services 2011 Maritime M&A Year in Review

V. OUTLOOK

Despite some positive signs early in 2012, projections of economic growth vary considerably. European financial troubles

are far from settled even though most US economists are confident that the European sovereign debt crises can be

contained. While the cooling of China’s formerly rampant growth concerns many trade analysts, a slight uptick in the US

GDP in recent months has encouraged hopes for a global recovery. While macroeconomic questions yield few concrete

answers, factors likely to drive Maritime financial transactions in the near future include:

Facility and Vessel Consolidation: Ports and terminals are high on the list of valued acquisitions

worldwide. Financially stronger vessel owners and operators likely will seek to acquire competitors

facing financial pressure as was the case when Maersk acquired tankers from its troubled peer

TORM in Denmark.

Increasing Strength in Conventional and Alternative Energy: As deep water oil rigs multiply

worldwide, their demand for equipment and services is increasing rapidly. Additionally, offshore

wind continues to gain traction as subsidies advance production in the US, Europe and Asia. A

subsidiary of oil rig builder Keppel recently acquired a 49.9% stake in OWEC Tower, a producer of

wind turbine foundations, for $11 million.

Regulatory Demands: Compliance with environmental regulations steadily will increase demand

for products and services, as well as M&A transactions involving related companies. Power plant

giant Wartsila acquired Hamworthy in early 2012, for $600 million (14.3X EBITDA) in large part to

access environmental technology and equipment-related business opportunities. On the services

front, JF Lehman & Co acquired much of Seacor Holdings’ environmental and spill response

business for $97 million in an all cash transaction. Another developing trend will be the

consolidation of smaller owner-operators that don’t have the capital and/or management capacity

to meet such demands as diesel emissions standards.

Shipbuilding and repair business segments also are likely to experience M&A-driven consolidation in years to come.

Shipyards worldwide face significant challenges in the wake of a sharp drop-off in orders during the global recession and in

the aftermath of 2010’s Deepwater Horizon Gulf oil spill. Japanese ship builders JFE Holdings and IHI agreed to merge in

early 2012 to form what they hope to be a stronger business entity better suited to compete with powerful Chinese and

Korean rivals. Shipyard orders have rebounded slightly across many sectors, but global uncertainty and overcapacity

remain causes for concern.

Slowly, global maritime trade and investment are recovering worldwide. Shifting capital flows and deal-making trends

reflects variations in economic growth among developing nations on one hand and emerging Third World powerhouses on

the other. Environmental and regulatory changes will continue to change globally. Change will be a constant as challenges

abound. Meanwhile, The McLean Group will continue to analyze and report on compelling global maritime M&A activity in

2012 and beyond.

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Transportation & Logistics Services 2011 Maritime M&A Year in Review

Transportation & Logistics

Team Mitch Martin

Principal mmartin@mcleanllc.com Harry Ward Director hward@mcleanllc.com Jeff Conn Director jconn@mcleanllc.com

Daniel Goldman

Analyst dgoldman@mcleanllc.com

ABOUT THE MCLEAN

GROUP

The McLean Group is an

investment bank providing

mergers and acquisitions

(M&A), business valuation

and strategic consulting

services to middle

market businesses.

Headquartered in

Washington, DC, we are

among the largest

independent middle

market investment banks

in the nation and serve

domestic and international

clients with a broad

resume of successfully

consummated financial

transactions.

THE MCLEAN GROUP

TRANSPORTATION & LOGISTICS PRACTICE

The McLean Group's Transportation & Logistics practice provides broad transaction

expertise to a wide range of clients in this multi-faceted industry. The firm’s international

network of contacts enables it to remain current with international industry trends.

The McLean Group has experience in the following industry sectors:

Transportation Logistics

Air, Ocean & Surface Freight Forwarding Air, Ocean & Surface Freight Forwarding

Maritime Shipping Distribution & Fulfillment

Trucking Third-Party Logistics (3PL)

Rail Technology

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