Star Bulk Carriers Corp said it would buy Oceanbulk Shipping LLC and Oceanbulk Carriers LLC in an all-stock deal to create the largest U.S.-listed dry bulk shipper.
Star Bulk is issuing 54.104 million new shares to buy the Oceanbulk companies, valuing the deal at about $653 million based on Star Bulk's Friday close of $12.07.
The deal comes as the global dry bulk shipping industry is poised to recover from a severe downturn, helped by steadying demand for iron ore and coal from China and India and the scrapping of older vessels.
After closing, the Athens, Greece-based company will have a market value of about $1 billion and a fleet of 69 vessels, Star Bulk said on Monday.
The company's shares were up 3 percent at $12.47 in early trading on the Nasdaq on Monday.
The Baltic Exchange's main index, which tracks rates for ships carrying dry bulk commodities such as coal, iron ore and grain, has gained nearly 4 percent in the past year after a five-year slide due to a rapid expansion of the global fleet.
The index, which touched a life-high of 11,793 in 2008, stood at about 880 on Monday.
Star Bulk's new shares will go to affiliates of Oaktree Capital Management and Star Bulk's non-executive chairman, Petros Pappas, and some of his immediate family members.
Oaktree will own 61.3 percent of Star Bulk, while Pappas and his family will own 12.5 percent.
Star Bulk will get 15 vessels and contracts for the construction of 26 more from Oceanbulk.
There were reports earlier this year that Oceanbulk was looking to go public.
Stifel Nicolaus & Co analyst Benjamin Nolan said he did not think the deal said much about the state of the dry bulk market, noting that Oaktree and Pappas were on both sides of the deal.
Star Bulk said it plans to pursue additional acquisitions after the completion of the deal.
Pappas will become chief executive of the combined company, while Star Bulk's current CEO, Spyros Capralos, will become non-executive chairman of the board.
Evercore was the financial adviser to a committee of Star Bulk's directors, while Wachtell Lipton Rosen & Katz was the legal counsel.
Paul, Weiss, Rifkind, Wharton & Garrison LLP was Oceanbulk's legal counsel. Seward & Kissel LLP was Star Bulk's legal counsel.
(Reporting by Swetha Gopinath and Kanika Sikka in Bangalore; Editing by Ted Kerr and Saumyadeb Chakrabarty)