Reprinted with Permission from the Q2 2014 edition of Maritime Professional
Insights
Maritime Finance and Risk
Maritime businesses face a broader range of risks than most.
A look at some recent business transactions is proof enough.
By Harry Ward
R
isk is a critical element of every maritime-re-
lated business transaction from a financial risk
management perspective, a market perspective,
or often both. As with most business segments,
maritime dealmakers and financiers employ elaborate risk
management tools to evaluate the efficacy of acquisitions,
loans and investments. But perhaps even more important
are the markets for goods and services that have developed
around the risky nature of most marine business sub-seg-
ments. These markets have attracted a great deal of invest-
ment in recent years as maritime companies strive to man-
age their risks in order to enhance financial performance as
well as improve their public relations and safety records.
Maritime businesses face a broader range of risks than most,
from navigation and safety in normal at-sea operations to the
threat of piracy and catastrophic collisions or environmental
mishaps. Just a few months into 2014, mariners have already
faced nearly 100 pirate attacks with dozens of crewmem-
bers taken hostage. Ship collisions and groundings remain
a regular occurrence with incidents from the US Gulf Coast
to Virginia to South Korea already this year, bringing human
casualties as well as environmental hazards. And of course,
the mystery of the vanished Malaysian Airline flight 370 has
ignited a massive high-profile search at sea, bringing focus
to the challenges of tracking and locating any object in the
expansive maritime domain.
Risk Creates Markets
In recent years such risks have spurred deal activity in busi-
nesses that are dedicated to maritime safety and environmen-
tal matters. In December 2013, France-based Orolia (NYSE
Alternext Paris: ALORO) announced its agreement to acquire
Techno-Sciences, Inc. (TSi) of Beltsville, MD. Orolia has
grown via a number of successful acquisitions and is firmly
established as a leader in the emergency response market and
in the Maritime Domain Awareness (MDA) sector. In January
2014, Orolia announced the creation of McMurdo Group to
unite its Positioning, Tracking and Monitoring Division and
its Boatracs, Kannad, McMurdo, SARBE and TSi brands.
With the acquisition of TSi, Orolia has added capabilities in-
cluding satellite ground stations and mission control software,
as well as coastal surveillance and offshore asset protection
solutions. Orolia has experienced solid growth and is actively
pursuing additional acquisitions in their niche markets.
Safety and environmental compliance are focus areas for
Drew Marine, which was acquired by an affiliate fund of pri-
vate equity group The Jordan Company from another marine-
savvy PEG, J.F. Lehman & Company last November. Con-
currently with the Drew acquisition, The Jordan Company
acquired Lehman’s portfolio company ACR Electronics. ACR
is a leader in maritime and aviation safety and survival solu-
tions such as rescue beacons and lighting products. As noted
in a past article, J.F. Lehman acquired OPA 1990-compliance
leader National Response Corp (NRC) from Seacor in 2012.
In March of 2014, NRC completed the add-on acquisition of
UK-based Sureclean Limited, a provider of specialty environ-
mental and industrial solutions.
Examining another area of risk, recent months have brought
a handful of deals in marine security and defense. In early
2014, The McLean Group represented 3 Phoenix in their sale
to Ultra Electronics of the UK for $87 million. 3 Phoenix pro-
vides real-time sensor and processing solutions, primarily for
Navy radar and sonar systems. The company will augment
Ultra’s existing Tactical & Sonar Systems division. In April
TE Connectivity (NYSE: TEL), formerly Tyco Electronics,
signed an agreement to acquire SEACON Group, a provider
of underwater connector technology for military and other
subsea customers for $490 million in cash. Finally, Swed-
ish military contractor SAAB has just announced that it is in
talks to acquire ThyssenKrupp Marine Systems, a builder of
submarines and warships in Europe.
An interesting deal took place in Canada during the first
quarter, when a group of independent board members of
Rutter Inc. consummated a tender offer for the shares of the
publicly-traded company. A provider of defense, navigation
and maritime surveillance technology centered mainly on
radar applications, Rutter had been struggling for years and
watched its share price fall by 95% since 2006. The investor
group commenced their tender offer to buy all the outstanding
shares of the company in January, and by March had received
deposits of more than 38% of the shares, giving the group an
80% controlling interest overall. The new owners will now de-
list Rutter from the Toronto exchange and perform an acquisi-
tion of remaining shares at the same price as their tender offer.
