IPO Watch: Navios Maritime Acquisition

Ann C. Logue | Jul 01, 2008 6:20am EDT | 1 Comment

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www.navios.com
(NYSE:NNA.U)
Priced June 25
$220 million proceeds
$275 million post-money valuation

In college, one of my best friends decided that my middle initial stood for “cynic.” Well, even my cynical self was blown away by the very idea of Navios Marine Acquisition. I can just picture a bunch of investment bankers sitting around a J.P. Morgan Chase conference room, wracking their brains to figure out how to earn fees in a market so terrible that only SPACs and dry-bulk shipping seem to generate any interest. (A SPAC, or special purpose acquisition company, is a blank-check deal in which investors give a management team money in hopes that they will make a good acquisition with it.) Then, the lightening bolt hits. “I’ve got it!” one of the well-clad folks shouts. “A dry-bulk SPAC!” And thus, Navios Maritime Acquisition is born.

The good news? The SPAC is sponsored by Navios Maritime Holdings (NYSE:NM), a Greek shipping company. Navios specializes in dry-bulk shipping, and the SPAC will instead look to acquire companies that handle liquid cargo, containers, or shipping logistics. One interesting wrinkle is that Navios Maritime Holdings itself was part of a blank-check company acquisition. It was acquired in 2005 by International Shipping Enterprises, a SPAC organized by Angeliki Frangou, who now serves as the CEO of both Navios Maritime Holdings and Navios Maritime Acquisition. She is also the CEO of Navios Maritime Partners L.P. (NYSE:NMM), which is an affiliate of Navios Maritime Holdings. Global demand for shipping is strong because of the growth of trade to and from China and India, so the various Navios businesses have great prospects.

Despite the fact that the board of directors is made up of people with experience in both shipping and finance, there are a few potential conflicts. Namely, Navios Maritime Holdings and Navios Maritime Partners are also looking to make acquisitions. The plan is for Holdings to acquire dry-bulk companies except for ships that are Panamax (maximum size to go through the Panama Canal) or Capesize (too large to go through the Suez Canal) class, Partners to acquire Panamax and Capesize ships, and Acquisitions to consider everything else. It’s possible that these companies, with their overlapping interests and managers, would end up cutting deals that benefited one or the other at the expense of shareholders. Still, it’s a play in two hot market sectors, and what investment banker can resist that?

Upcoming IPOs

Energy Recovery (Nasdaq:ERII); www.energyrecovery.com; scheduled for week of June 30; $112 million estimated proceeds; $406.2 million estimated post-money valuation: The earth is a water-based planet, and very little of that water is potable. It’s possible to remove the saline from salt water, but the process, known as reverse osmosis, uses so much energy that it’s barely feasible, even in Dubai. Energy Recovery makes pumping devices that conserve much of the energy used in desalination, making it more affordable. The company makes good money, too, with net income of $5.8 million on $35.4 million in revenue in 2007, and the company’s revenues and profits have been growing over the years. Several insiders are selling parts of their positions on the deal.

Galiot Capital (NYSE:GTC); scheduled for week of June 30; $250.5 million estimated proceeds; $275.3 million estimated post-money valuation: Galiot Capital is a REIT that plans to invest in mortgage-backed securities, especially those backed by the Federal agencies. It’s organized by Fischer Francis Trees & Watts, a fixed-income investment manager that is a subsidiary of BNP Paribas; another BNP Paribas subsidiary, and Charter Atlantic Corporation, will also be investing in Galiot. The managers plan to use leverage to increase potential returns and take advantage of the current depressed market for these securities.