Billionaire Fredriksen merges bulk carriers to catch shipping recovery

John Fredriksen will merge the two dry bulk shippers he controls, Golden Ocean and Knightsbridge Shipping, to prepare for a consolidation and position himself for a recovery in the market.

Golden Ocean shareholders will receive 0.13749 share in Knightsbridge, which will issue 61.5 million shares, the Bermuda-based companies said on Tuesday.

Fredriksen's Hemen Holding, which owns 41 per cent of Golden Ocean and 38 per cent of Knightsbridge, will, with affiliates, control about 39 per cent of the combined company.

"With the current weakness in the dry bulk market, we believe there will be attractive consolidation opportunities going forward," Fredriksen and Knightsbridge chairman and chief executive Ola Lorentzon said in a statement. "Upon an expected recovery of the dry bulk market and as newbuilds are brought into the fleet, we believe the combined company will generate significant cash flow."

Fredriksen's transaction will form one of the biggest dry bulk shippers with 72 vessels, of which 36 are under construction, in a market suffering from oversupply since the financial crisis in 2008. The Baltic Dry Index, which tracks shipping rates for dry cargo, has fallen about 90 per cent since a peak in June 2008.

The combined company will be run by Golden Ocean chief executive Herman Billung. The merger is subject to the approval of 75 per cent of shareholders at Golden Ocean and Knightsbridge in general meetings.