Horizon Lines, a U.S. domestic, Jones Act carrier, announced that the company is being broken up, with its Alaska and Hawaii services being sold to existing carriers and its Puerto Rico service being shut down. All this following a long period of time when Horizon bounced around with multiple rounds of private equity ownership and was then tangled in an anti-trust investigation by the U.S. Justice Department.
According to the transaction terms (still requiring regulatory approval), Matson, Inc. will acquire any outstanding shares of Horizon for $69.2 million plus the repayment of outstanding debt, and take over the Alaska service. The Hawaii operations will be sold for $141.5 million to the Pasha Group, which operates roll-on/roll-off tonnage in that market. Puerto Rico service will be shut down by the end of this year.
In 2011, Horizon went through a large restructuring. The company has funded debt that totals over $522 million at an average interest rate of 12.4 percent, and most of that debt will mature in 2016. Horizon operates 13 vessels in the domestic Jones Act trades, and currently operates five port terminals in Hawaii, Alaska and Puerto Rico.
Alaska
Horizon deploys three diesel-powered Jones Act container ships in Alaska, and operates terminals in Kodiak, Dutch Harbor and Anchorage. The company’s Alaska service involves two weekly sailings from Tacoma to Anchorage and Kodiak, as well as a weekly sailing to Dutch Harbor. Horizon also has a reserve steam-powered Jones Act container ship for dry dock relief.
Matt Cox, President and CEO of Matson, stated, “The acquisition of Horizon’s Alaska operations is a rare opportunity to substantially grow our Jones Act business.”
Hawaii
The Pasha Group will acquire four Jones Act container ships in the Hawaii market, with plans to operate the vessels alongside its ro-ro service.
Said Emily Sinclair, a spokesperson for Pasha, “After closing, we plan to start the process to upgrade and refurbish the Horizon vessels in keeping with our commitment to environmental responsibility and stewardship. We anticipate that these improvements will allow Pasha to provide even higher quality service to our valued customers. Pasha now represents only a very small percentage of the shipping volume between the Mainland United States and Hawaii. Through this transaction, Pasha will grow into a significant competitor and provide a viable alternative to Matson on these routes.”
Matson, on the other hand, did not look into buying the Hawaii operations due to potential anti-trust concerns. In fact, the Matson transaction is contingent upon the Pasha/Horizon transaction closing, which is subject to review by the Federal Trade Commission and the Department of Justice. The transaction will be subject to an antitrust examination under the Hart-Scott-Randino Act of 1976.
