Diana-Genco battle escalates after rejected takeover bid and counterproposal

In late November, Diana submitted a letter to Genco’s board proposing to acquire all outstanding shares it does not already own for US$20.60 per share in cash. Diana currently holds approximately 14.8% of Genco’s outstanding shares.

The move followed Diana’s earlier entry into Genco’s shareholder base, which prompted Genco to adopt a shareholder rights plan, commonly known as a ’poison pill.’

Genco announced on 13 January that its board had unanimously rejected Diana’s non-binding, indicative proposal, stating that it “materially undervalues Genco.”

“Diana’s proposal, by its very nature, lacked the value, structure and certainty to warrant further engagement,” the US-based bulker owner said.

Genco argued that the offer failed to reflect the inherent value of its high-quality, modern fleet and its track record of durable cash flow generation across market cycles. The company also stressed that Diana’s price did not include an appropriate premium for a change of control.

The US owner added that Diana’s offer was well below Genco’s net asset value (NAV) at a time when asset values are rising across the industry, and significantly below Genco’s 10-year high stock price of US$26.93.

Genco further highlighted what it described as considerable execution risks arising from the proposed transaction structure, Diana’s balance sheet and leverage profile, and the absence of committed financing.

From target to would-be acquirer

Rather than negotiate from a defensive position, Genco has proposed a reverse takeover in which Genco would acquire Diana using a combination of cash and Genco equity.

“Our board determined that the best transaction structure includes Genco acquiring Diana using cash and Genco’s superior equity currency as consideration, especially given Genco’s premium valuation and superior total shareholder return versus Diana,” the company said.

Genco added that it attempted to engage with Diana – both directly and through advisors – to explore such an alternative transaction, but Diana declined and instead reiterated its initial bid.

According to Genco, Diana’s shareholders would receive immediate and significant cash value, along with the opportunity to benefit from the upside potential of a combined company led by Genco’s management team.

Diana: ’Deeply disappointed’

Diana Shipping responded strongly, expressing deep disappointment at Genco’s decision and dismissing the counterproposal as a tactic lacking any meaningful purpose.

“We are deeply disappointed that, despite our continued willingness to enter into discussions, Genco instead chose to reject our proposal without any engagement with our advisors or us,” said chief executive Semiramis Paliou.

She added that Genco’s concerns regarding structure, valuation, and execution certainty were all issues Diana was prepared to discuss if Genco would engage.

“We continue to believe that our proposed all-cash transaction is the optimal way to implement the combination, and we would welcome a dialogue with Genco’s board to address any questions they may have about our proposal,” Ms Paliou concluded.

Diana also criticised Genco’s counteroffer for lacking any specifics on price, premium, cash or stock consideration, or other essential financial terms that would allow proper assessment.

“Diana believes this ‘proposal’ is merely a tactic that serves no serious purpose other than to dismiss and detract from Diana’s attractive offer,” the company said.

Diana concluded by stating that its board is considering all available options to advance what it maintains is a compelling offer to acquire Genco.

Fleet compositions

Diana Shipping currently owns 36 bulk carriers with a combined carrying capacity of 4.1M dwt and a weighted average age of 12.1 years.

Genco’s fleet consists of 45 vessels with an average age of 12.5 years and a total capacity of approximately 5.0M dwt.