OSG To Acquire Stelmar Shipping

Monday, December 13, 2004
Overseas Shipholding Group, Inc. signed a definitive merger agreement to acquire Stelmar Shipping Ltd., an international provider of petroleum product and crude oil transportation services with one of the world's largest and most modern Handymax and Panamax tanker fleets.

Under the terms of the merger agreement, holders of Stelmar's common stock will receive $48.00 per share in cash upon the closing of the merger, implying an aggregate equity market value of $843 million for Stelmar. Taking into account Stelmar's outstanding debt, the total value of the transaction is approximately $1.3 billion.

"The acquisition of Stelmar will establish a leading platform for OSG in product tankers and Panamax tankers and fulfill an important strategic objective for OSG," said Morten Arntzen, President and Chief Executive Officer of OSG. "This acquisition will be accretive to earnings from inception and will complement OSG's already leading positions in the VLCC and Aframax sectors and its recent entry into the LNG sector," Mr. Arntzen continued. "Upon completion of the Stelmar acquisition, OSG will be the second largest publicly traded oil tanker company measured by number of vessels and the third largest measured by deadweight tons. The combined company will have a fleet of 91 international flag vessels totaling 12.9 million deadweight tons. The combined international flag fleets will be among the youngest fleets in the industry, and 96% of the vessels will be double-hulled or double-sided," Arntzen concluded.

The acquisition provides OSG with:

-- The addition of the Stelmar fleet (comprising 24 Handymax product tankers, 13 Panamaxes and 3 Aframaxes) will result in OSG being a global leader in both crude and product tanker segments.

Myles Itkin, Chief Financial Officer of OSG, stated "OSG will finance the transaction with cash and funds available under its existing credit facilities." Mr. Itkin went on to say that "OSG has reported record time charter equivalent revenues of $513.9 million and earnings of $190.1 million for the nine months ended September 30, 2004 by focusing on crude transportation with spot orientation. During the same period, Stelmar has reported record time charter equivalent revenues of $167.0 million and earnings of $40.6 million by focusing on product tankers and Panamaxes with time charter orientation. Following the acquisition, OSG will have a more balanced mix of spot and time charter revenue which will improve both the quality and sustainability of OSG's future earnings."

The transaction is subject to approval by a majority of Stelmar's shareholders and satisfaction of customary closing conditions. The transaction is expected to close by the end of January 2005.

UBS Investment Bank is acting as OSG's sole financial advisor and Cravath, Swaine & Moore LLP is acting as legal counsel in connection with the transaction.

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