Why private-equity-cum-hedge-fund titan Michael Gross’s special purpose acquisition vehicle, Marathon Acquisition Corp., is finding the container-shipping business mighty fetching these days.
Marathon Acquisition Corp. is expected to acquire a majority stake in London-based Global Ship Lease Inc., in a deal that values the equity of the container-ship owner and operator at roughly $500 million.
Under the transaction, which is expected to be announced Monday, Global Ship Lease will become the name of the combined company and will be publicly traded. It owns 12 container ships with five more under contract, and will have total debt of about $510 million once the five ships are acquired.
Marathon is part of a crop of special purpose acquisition vehicles, or SPACs, that raise money in initial public offerings in order to buy operating companies within a certain time frame, usually 18 to 24 months. SPACs, also called "blank-check" companies, require a majority of shareholders to approve any acquisition. They typically put the IPO proceeds in trust during that waiting period; if no deal is approved, shareholders get their money back.
Marathon is run by Michael Gross, a founding executive at private-equity firm Apollo Management LP who is now at hedge fund Magnetar Capital LLC. Mr. Gross formed Marathon in 2006, raising about $300 million in an initial public offering.
The deal calls for 66% of Global Ship Lease to be acquired by Marathon. The rest of the company will remain in the hands of its current owner, CMA CGM SA of France, a large container-shipping company.
Global Ship Lease has contracts in place to purchase an additional five vessels from CMA CGM for delivery between December 2008 and July 2009. Marathon, which is currently listed on the American Stock Exchange, intends to list Global Ship Lease on the New York Stock Exchange.
The company expects to pay a dividend that, based on Marathon's current share price, is expected to yield about 9%. Thursday, Marathon shares finished at $7.87, up 11 cents, or 1.4%. U.S. markets were closed Friday.
SPACs have exploded in popularity. In 2007, they made up nearly one-quarter of U.S. IPOs. High-profile dealmakers such as New York investor Nelson Peltz and Texas buyout executive Thomas Hicks have recently raised public pools of money through SPACs and are currently looking for acquisitions.
CMA CGM tried to spin-off Global Ship Lease in a public offering last year, but pulled the offering in November citing market conditions.