6-K
Star Bulk Carriers Corp. (SBLK)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of March 2024
Commission File Number: 001-33869
STAR BULK CARRIERS CORP.
(Translation of registrant’s name into English)
Star Bulk Carriers Corp.
c/o Star Bulk Management Inc.
40 Agiou Konstantinou Street,
15124 Maroussi,
Athens, Greece
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
INFORMATION CONTAINED IN THIS FORM 6-K REPORT
As previously announced, on December 11, 2023, Star Bulk Carriers Corp., a Republic of the Marshall Islands corporation (“Star Bulk” or the “Company”), Star Infinity Corp., a Republic of the Marshall Islands corporation and wholly-owned subsidiary of Star Bulk (“Merger Sub”), and Eagle Bulk Shipping Inc., a Republic of the Marshall Islands corporation (“Eagle”), entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which Star Bulk and Eagle have agreed, subject to the terms and conditions of the Merger Agreement, to effect a stock-for-stock merger whereby Merger Sub will merge with and into Eagle, resulting in Eagle surviving the merger as a wholly owned subsidiary of Star Bulk (the “Eagle Merger”). The completion of the Eagle Merger is subject to the satisfaction or waiver of a number of conditions as set forth in the Merger Agreement. These include, among others, the approval and authorization of the Merger Agreement and the Eagle Merger at the Eagle shareholders special meeting scheduled for April 5, 2024. The Eagle Merger is expected to close in the first half of 2024, subject to the satisfaction or waiver of the closing conditions. This report on Form 6-K includes the following financial statements that are related to the Eagle Merger:
| (i) | in exhibit 99.1, the audited consolidated balance sheets of Eagle as of December 31, 2023 and 2022 and the related audited consolidated statements of operations, statements of comprehensive income, statements of<br> changes in stockholders’ equity and statements of cash flows for the years ended December 31, 2023, 2022 and 2021, together with the notes thereto and the report of independent registered public accounting firm thereon. |
|---|---|
| (ii) | in exhibit 99.2, (i) the unaudited pro forma condensed combined balance sheet of the Company as of December 31, 2023, which gives effect to the Eagle Merger as if it had been consummated on December 31, 2023<br> (the “pro forma condensed combined balance sheet”), and (ii) the unaudited pro forma condensed combined income statement of the Company for the year ended December 31, 2023, which gives effect to the Eagle Merger as if it had been<br> consummated on January 1, 2023 (the “pro forma condensed combined income statement” and, together with the pro forma condensed combined balance sheet, the “pro forma condensed combined financial information”). The unaudited pro forma<br> condensed combined financial information is presented to illustrate the proposed merger of Star Bulk and Eagle. The pro forma condensed combined financial information is based upon, derived from, and should be read in conjunction with the<br> following: (i) the historical audited consolidated financial statements of Star Bulk, which are available in Star Bulk’s Annual Report on Form 20‑F for the fiscal year ended December 31, 2023, as filed with the U.S. Securities and<br> Exchange Commission (“SEC”) on March 13, 2024, and (ii) the historical audited consolidated financial statements of Eagle, which are available in Eagle’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed<br> with the SEC on March 4, 2024. |
| --- | --- |
| The unaudited pro forma condensed combined financial information has been prepared for illustrative purposes only and is not necessarily indicative of what the financial position or results of<br> operations of Star Bulk, following the closing of the Eagle Merger (the “combined company”), actually would have been had the Eagle Merger occurred as of the dates indicated. In addition, the unaudited pro forma condensed combined<br> financial information does not purport to project the future financial position or operating results of the combined company. Future results may vary significantly from the results reflected because of various factors. | |
| --- |
INCORPORATION BY REFERENCE
The exhibits to this Form 6-K are hereby incorporated by reference into the registrant’s Registration Statement on Form F-4 (File No. 333-276621), Registration Statements on Form F-3 (File Nos. 333-264226, 333-232765, 333-234125 and 333-252808) and Registration Statement on Form S-8 (File No. 333-176922), in each case to the extent not superseded by information subsequently filed or furnished (to the extent we expressly state that we incorporate such furnished information by reference) by Star Bulk under the Securities Act of 1933 or the Securities Exchange Act of 1934, in each case as amended.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This Form 6-K, and the documents to which the Company refers in this Form 6-K, as well as information included in oral statements or other written statements made or to be made by the Company, contain “forward-looking statements,” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Exchange Act, with respect to our financial condition, results of operations and business and our expectations or beliefs concerning future events. Words such as, but not limited to, “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “targets,” “projects,” “likely,” “would,” “will,” “could,” “should,” “may,” “forecasts,” “potential,” “continue,” “possible” and similar expressions or phrases may identify forward-looking statements.
All forward-looking statements involve risks and uncertainties. The occurrence of the events described, and the achievement of the expected results, depend on many events, some or all of which are not predictable or within our control. Actual results may differ materially from expected results.
In addition, important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include:
| ● | uncertainties as to the timing of the proposed Eagle Merger; |
|---|---|
| ● | the possibility that the closing conditions, including approval of Eagle’s shareholders, to the proposed Eagle Merger may not be satisfied or waived; |
| ● | the possibility that costs or difficulties related to the integration of the Company’s and Eagle’s operations will be greater than expected; |
| ● | the effects of disruption by the announcement of the proposed Eagle Merger making it more difficult to maintain relationships with employees, customers, vendors and other business partners; |
| ● | risks related to the proposed Eagle Merger diverting management’s attention from the Company’s and Eagle’s ongoing business operations; |
| ● | the possibility that the expected synergies and value creation from the proposed Eagle Merger will not be realized, or will not be realized within the expected time period; |
| ● | the risk that shareholder litigation in connection with the contemplated transactions may affect the timing or occurrence of the proposed Eagle Merger or result in significant costs of defense, indemnification and liability; |
| ● | transaction costs related to the Eagle Merger; |
| ● | general dry bulk shipping market conditions, including fluctuations in charter rates and vessel values; |
| ● | the strength of world economies; |
| ● | the stability of Europe and the Euro; |
| ● | fluctuations in currencies, interest rates and foreign exchange rates; |
| ● | business disruptions due to natural and other disasters or otherwise, such as the impact of any new outbreaks or new variants of coronavirus that may emerge; |
| ● | the length and severity of epidemics and pandemics and their impact on the demand for seaborne transportation in the dry bulk sector; |
| ● | changes in supply and demand in the dry bulk shipping industry, including the market for our vessels and the number of newbuildings under construction; |
| ● | the potential for technological innovation in the sector in which we operate and any corresponding reduction in the value of our vessels or the charter income derived therefrom; |
| ● | changes in our expenses, including bunker prices, dry docking, crewing and insurance costs; |
| ● | changes in governmental rules and regulations or actions taken by regulatory authorities; |
| ● | potential liability from pending or future litigation and potential costs due to environmental damage and vessel collisions; |
| ● | the impact of increasing scrutiny and changing expectations from investors, lenders, charterers and other market participants with respect to our Environmental, Social and Governance (“ESG”) practices; |
| ● | our ability to carry out our ESG initiatives and thereby meet our ESG goals and targets; |
| ● | new environmental regulations and restrictions, whether at a global level stipulated by the International Maritime Organization, and/or regional/national imposed by regional authorities such as the European Union or individual countries; |
| ● | potential cyber-attacks which may disrupt our business operations; |
| ● | general domestic and international political conditions or events, including “trade wars”, the ongoing conflict between Russia and Ukraine, the conflict between Israel and Hamas and the Houthi attacks in the Red Sea and the Gulf of<br> Aden; |
|---|---|
| ● | the impact on our common shares and reputation if our vessels were to call on ports located in countries that are subject to restrictions imposed by the U.S. or other governments; |
| ● | our ability to successfully compete for, enter into and deliver our vessels under time charters or other employment arrangements for our existing vessels after our current charters expire and our ability to earn income in the spot<br> market; |
| ● | potential physical disruption of shipping routes due to accidents, climate-related reasons (acute and chronic), political events, public health threats, international hostilities and instability, piracy or acts by terrorists; |
| ● | the availability of financing and refinancing; |
| ● | the failure of our contract counterparties to meet their obligations; |
| ● | our ability to meet requirements for additional capital and financing to complete our newbuilding program and grow our business; |
| ● | the impact of our indebtedness and the compliance with the covenants included in our debt agreements; |
| ● | vessel breakdowns and instances of off-hire; |
| ● | potential exposure or loss from investment in derivative instruments; |
| ● | potential conflicts of interest involving our Chief Executive Officer, his family and other members of our senior management; |
| ● | our ability to complete acquisition transactions as and when planned and upon the expected terms; |
| ● | the impact of port or canal congestion or disruptions; and |
| ● | the risk factors and other factors referred to in the Company’s reports filed with or furnished to the SEC. |
Consequently, all of the forward-looking statements we make in this document are qualified by the information contained or referred to herein, including, but not limited to, (i) the information contained under this heading and (ii) the information disclosed in the Company’s annual report on Form 20-F for the fiscal year ended 2023, filed with the SEC on March 13, 2024.
You should carefully consider the cautionary statements contained or referred to in this section in connection with any subsequent written or oral forward-looking statements that may be issued by us or persons acting on our behalf. Except as required by law, the Company undertakes no obligation to update any of these forward-looking statements, whether as a result of new information, future events, a change in the Company’s views or expectations or otherwise, except as required by applicable law. New factors emerge from time to time, and it is not possible for the Company to predict all of these factors. Further, the Company cannot assess the impact of each such factor on its business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statement.
Important Information and Where to Find It
This communication may be deemed to be solicitation material in respect of the proposed Eagle Merger between Star Bulk and Eagle. In connection with the proposed Eagle Merger, Star Bulk filed with the SEC a registration statement on Form F-4 on January 19, 2024, which was amended on February 8, 2024 and declared effective on February 12, 2024, that includes a proxy statement of Eagle that also constitutes a prospectus of Star Bulk. Star Bulk and Eagle may also file other documents with the SEC regarding the proposed Eagle Merger. This communication is not a substitute for the proxy statement/prospectus, Form F-4 or any other document which Star Bulk or Eagle may file with the SEC. Investors and security holders of Star Bulk and Eagle are urged to read the proxy statement/prospectus, Form F-4 and all other relevant documents filed or to be filed with the SEC carefully when they become available because they will contain important information about Star Bulk, Eagle, the transaction and related matters. Investors will be able to obtain free copies of the proxy statement/prospectus and Form F-4 and other documents filed with the SEC by Star Bulk and Eagle through the website maintained by the SEC at www.sec.gov. Copies of documents filed with the SEC by Star Bulk will be made available free of charge on Star Bulk’s investor relations website at https://www.starbulk.com/gr/en/ir-overview/. Copies of documents filed with the SEC by Eagle will be made available free of charge on Eagle’s investor relations website at https://ir.eagleships.com.
No Offer or Solicitation
This communication is not intended to and does not constitute an offer to sell or the solicitation of an offer to subscribe for or buy or an invitation to purchase or subscribe for any securities or the solicitation of any vote or approval in any jurisdiction, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in contravention of applicable law. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
Participants in the Solicitation
Star Bulk, Eagle and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the holders of Eagle securities in connection with the proposed Eagle Merger. Information regarding these directors and executive officers and a description of their direct and indirect interests, by security holdings or otherwise, were included in Form F-4, including the proxy statement/prospectus regarding the proposed Eagle Merger, filed on January 19, 2024, which was amended on February 8, 2024 and declared effective on February 12, 2024, and other relevant materials to be filed with the SEC by Star Bulk and Eagle. Information regarding Star Bulk’s directors and executive officers is available in Part I. Item 6. Directors, Senior Management and Employees of Star Bulk’s Annual Report on Form 20-F for the fiscal year ended December 31, 2023 filed with the SEC on March 13, 2024. Information regarding Eagle’s directors and executive officers is available in the sections entitled Corporate Governance-The Board of Directors and “Executive Officers” of Eagle’s proxy statement relating to its 2023 annual meeting of shareholders filed with the SEC on April 27, 2023. These documents will be available free of charge from the sources indicated above.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: March 15, 2024
| Star Bulk Carriers Corp. | ||
|---|---|---|
| By: | /s/ Simos Spyrou | |
| Name: | Simos Spyrou | |
| Title: | Co-Chief Financial Officer |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement No. 333-276621 on Form F-4, Registration Statement Nos. 333-232765, 333-234125, 333-252808 and 333-264226 on Form F-3 and Registration Statement No. 333-176922 on Form S-8 of Star Bulk Carriers Corp. of our report dated March 4, 2024, relating to the financial statements of Eagle Bulk Shipping Inc. appearing in the Annual Report on Form 10-K of Eagle Bulk Shipping Inc. for the year ended December 31, 2023 and incorporated by reference into this report on Form 6-K, dated March 15, 2024, as exhibit 99.1.
/s/ DELOITTE & TOUCHE LLP
New York, New York
March 15, 2024
Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial information of Star Bulk Carriers Corp., following the closing of the merger (as defined below) (the “combined company”), is presented to illustrate the proposed merger whereby Star Infinity Corp., a wholly-owned subsidiary of Star Bulk (“Merger Sub”), will merge with and into Eagle Bulk Shipping Inc., resulting in Eagle surviving the merger as a wholly owned subsidiary of Star Bulk (the “merger”).
On December 11, 2023, Star Bulk and Merger Sub entered into an Agreement and Plan of Merger (the “merger agreement”) with Eagle, pursuant to which Merger Sub will merge with and into Eagle, and Eagle will continue as the surviving corporation as a wholly-owned subsidiary of Star Bulk. Upon the closing of the merger, the shareholders of Eagle will receive merger consideration in the form of Star Bulk common stock.
The unaudited pro forma condensed combined balance sheet as of December 31, 2023, gives effect to the merger as if it had been consummated on December 31, 2023 (the “pro forma condensed combined balance sheet”), and the unaudited pro forma condensed combined income statement for the year ended December 31, 2023 gives effect to the merger as if it had been consummated on January 1, 2023 (the “pro forma condensed combined income statement”). The pro forma condensed combined balance sheet and the pro forma condensed combined income statement (together, the “pro forma condensed combined financial information”) are based upon, derived from, and should be read in conjunction with the following: (i) the historical audited consolidated financial statements of Star Bulk, which are available in Star Bulk’s Annual Report on Form 20-F for the fiscal year ended December 31, 2023, as filed with the SEC on March 13, 2024 and which is incorporated by reference in this report on Form 6-K (the “Star Bulk Annual Report”), and (ii) the historical audited consolidated financial statements of Eagle, which are available in Eagle’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on March 4, 2024 and which is incorporated by reference in this report on Form 6-K (the “Eagle Annual Report”).
Basis of Preparation
The pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X, as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” Release No. 33-10786 replaced the existing pro forma adjustment criteria with simplified requirements to depict the accounting for the transaction (“transaction accounting adjustments”) and optionally to present the reasonably estimable synergies and other transaction effects (“management’s adjustments”), limiting management’s adjustments to those that are reasonably estimable and that have occurred or are reasonably expected to occur. We have elected not to present management’s adjustments and will only be presenting transaction accounting adjustments in the pro forma condensed combined financial information.
The pro forma condensed combined financial information is subject to the assumptions and adjustments described in the accompanying notes. The pro forma adjustments are based on available information and assumptions that Star Bulk’s management believes are reasonable under the circumstances. Actual results may differ materially from the assumptions within the accompanying pro forma condensed combined financial information.
As further discussed in Note 3. Accounting for the merger, below, the merger has been treated as an asset acquisition under the guidelines of Accounting Standard Codification (“ASC”) 805, Business Combinations, and Accounting Standard Update (“ASU”) 2017-01, Business Combinations (Topic 805), whereby all assets acquired and liabilities assumed are recorded at the cost of the acquisition, including transaction costs, on the basis of their relative fair values. For purposes of the pro forma condensed combined financial information, the fair values of Eagle’s identifiable tangible and intangible assets acquired and liabilities assumed are based on a preliminary estimate of fair value. Certain current market-based assumptions were used that will be updated in the accounting for the merger upon its completion. Star Bulk’s management believes that the estimated fair values utilized for the assets to be acquired and liabilities assumed for purposes of the pro forma condensed combined financial information, are based on reasonable estimates and assumptions. Preliminary fair value estimates may change as additional information becomes available and such changes could be material.
The pro forma condensed combined financial information is provided for illustrative and information purposes only and is not intended to represent or necessarily be indicative of the combined company’s results of operations or financial condition had the merger been completed on the dates indicated, nor do they purport to project our results of operations or financial condition for any future period or as of any future date. The pro forma condensed combined financial information does not include any expected cost savings or operating synergies, which may be realized subsequent to the merger. Moreover, the pro forma adjustments represent best estimates based upon the information available to date and are preliminary and subject to change after more detailed information is obtained.
The pro forma condensed combined financial information should be read in conjunction with the accompanying notes as well as the above referenced historical consolidated financial statements of both Star Bulk and Eagle.
STAR BULK CARRIERS CORP.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 2023
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
| Star Bulk<br><br> <br>Historical | Eagle<br><br> <br>Historical | Transaction<br><br> <br>Accounting<br><br> <br>Adjustments | Notes | Pro Forma<br><br> <br>Combined | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| ASSETS | |||||||||||
| CURRENT ASSETS | |||||||||||
| Cash and cash equivalents | $ | 227,481 | $ | 118,615 | $ | (7,638 | ) | 4.A | $ | 338,458 | |
| Restricted cash, current | 32,248 | - | 2,219 | 4.B | 34,467 | ||||||
| Trade accounts receivable, net | 68,624 | 30,917 | - | 99,541 | |||||||
| Inventories | 62,362 | 24,988 | 3,713 | 4.C | 91,063 | ||||||
| Collateral on derivatives | - | 2,219 | (2,219 | ) | 4.B | - | |||||
| Due from managers | 23 | - | - | 23 | |||||||
| Due from related parties | 38 | - | - | 38 | |||||||
| Prepaid expenses and other receivables | 19,296 | 5,525 | - | 24,821 | |||||||
| Derivatives, current asset portion | 6,305 | 6,824 | - | 13,129 | |||||||
| Other current assets | 22,830 | 458 | - | 23,288 | |||||||
| Vessel held for sale | 15,190 | - | - | 15,190 | |||||||
| Total Current Assets | 454,397 | 189,546 | (3,925 | ) | 640,018 | ||||||
| FIXED ASSETS | |||||||||||
| Vessels and advances for vessel upgrades, net | 2,539,297 | 904,298 | 146,177 | 4.D.i) | 3,589,772 | ||||||
| Other fixed assets | 446 | 1,086 | - | 1,532 | |||||||
| Deferred drydock costs, net | - | 38,717 | (38,717 | ) | 4.E | - | |||||
| Advances for ballast water systems and other assets | - | 1,414 | (1,414 | ) | 4.D.iii) | - | |||||
| Total Fixed Assets | 2,539,743 | 945,515 | 106,046 | 3,591,304 | |||||||
| OTHER NON-CURRENT ASSETS | |||||||||||
| Long term Investment | 1,736 | - | - | 1,736 | |||||||
| Restricted cash , non-current | 2,021 | 2,575 | - | 4,596 | |||||||
| Operating leases, right-of-use assets | 27,825 | 7,182 | - | 35,007 | |||||||
| Derivatives, non-current asset portion | 2,533 | 3,136 | - | 5,669 | |||||||
| TOTAL ASSETS | $ | 3,028,255 | $ | 1,147,954 | $ | 102,121 | $ | 4,278,330 | |||
| LIABILITIES & STOCKHOLDERS' EQUITY | |||||||||||
| CURRENT LIABILITIES | |||||||||||
| Current portion of long-term bank loans | $ | 249,125 | $ | 49,800 | $ | 7,601 | 4.I.i) | $ | 306,526 | ||
| Convertible bond debt | - | 103,890 | (34,521 | ) | 4.G | 69,369 | |||||
| Lease financing short term | 2,731 | - | - | 2,731 | |||||||
| Accounts payable | 39,317 | 21,245 | - | 60,562 | |||||||
| Due to managers | 7,386 | - | - | 7,386 | |||||||
| Due to related parties | 1,659 | - | - | 1,659 | |||||||
| Accrued liabilities | 31,372 | 26,968 | 8,659 | 4.H | 66,999 | ||||||
| Operating lease liabilities, current | 5,251 | 6,153 | - | 11,404 | |||||||
| Derivatives, current liability portion | 5,784 | 479 | - | 6,263 | |||||||
| Deferred revenue | 16,738 | 4,312 | - | 21,050 | |||||||
| Total Current Liabilities | 359,363 | 212,847 | (18,261 | ) | 553,949 | ||||||
| NON-CURRENT LIABILITIES | |||||||||||
| Long-term bank loans, net of current portion and unamortized loan issuance costs | 970,039 | 330,113 | (2,202 | ) | 4.I.ii) | 1,297,950 | |||||
| Lease financing long term, net of unamortized lease issuance costs | 15,208 | - | - | 15,208 | |||||||
| Derivatives, non-current liability portion | - | 1,505 | - | 1,505 | |||||||
| Operating lease liabilities, non-current | 22,574 | 2,576 | - | 25,150 | |||||||
| Other non-current liabilities | 1,001 | 695 | - | 1,696 | |||||||
| TOTAL LIABILITIES | 1,368,185 | 547,736 | (20,463 | ) | 1,895,458 | ||||||
| SHAREHOLDERS' EQUITY | |||||||||||
| Total Shareholders' Equity | 1,660,070 | 600,218 | 122,584 | 4.J | 2,382,872 | ||||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 3,028,255 | $ | 1,147,954 | $ | 102,121 | $ | 4,278,330 |
See accompanying notes to the unaudited pro forma condensed combined financial information.
STAR BULK CARRIERS CORP.
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2023
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
| Star Bulk<br><br> <br>Historical | Eagle<br><br> <br>Historical | Transaction<br><br> <br>Accounting<br><br> <br>Adjustments | Notes | Pro Forma<br><br> <br>Combined | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenues: | ||||||||||||||
| Voyage revenues | $ | 949,269 | $ | 393,799 | $ | - | $ | 1,343,068 | ||||||
| Expenses / (Income): | ||||||||||||||
| Voyage expenses | 253,843 | 106,686 | (504 | ) | 4.K | 360,025 | ||||||||
| Charter-in hire expenses | 17,656 | 36,534 | - | 54,190 | ||||||||||
| Vessel operating expenses | 221,327 | 120,461 | - | 341,788 | ||||||||||
| Dry docking expenses | 41,969 | - | 15,098 | 4.F.ii) | 57,067 | |||||||||
| Depreciation | 138,429 | 60,521 | (11,316 | ) | 4.D.ii), 4.F.i) | 187,634 | ||||||||
| Management fees | 16,809 | - | - | 16,809 | ||||||||||
| General and administrative expenses | 54,413 | 43,586 | - | 97,999 | ||||||||||
| Impairment loss | 17,838 | - | - | 17,838 | ||||||||||
| Loss on write-down of inventory | 9,318 | - | - | 9,318 | ||||||||||
| Other operational loss | 952 | 7,346 | - | 8,298 | ||||||||||
| Other operational gain | (33,980 | ) | - | - | (33,980 | ) | ||||||||
| Loss on bad debt | 300 | - | 504 | 4.K | 804 | |||||||||
| (Gain)/Loss on forward freight agreements and bunker swaps, net | 1,336 | - | (1,952 | ) | 4.L | (616 | ) | |||||||
| Gain on sale of vessels | (29,399 | ) | (19,731 | ) | - | (49,130 | ) | |||||||
| Impairment of operating lease right of use of asset | - | 722 | - | 722 | ||||||||||
| Total operating expenses, net | 710,811 | 356,125 | 1,830 | 1,068,766 | ||||||||||
| Operating income | 238,458 | 37,674 | (1,830 | ) | 274,302 | |||||||||
| Other Income / (Expenses): | ||||||||||||||
| Interest and finance costs | (71,319 | ) | (23,602 | ) | (5,826 | ) | 4.M | (100,747 | ) | |||||
| Interest income and other income/(loss) | 15,228 | 6,704 | - | 21,932 | ||||||||||
| Gain/(Loss) on interest rate swaps, net | (3,539 | ) | - | - | (3,539 | ) | ||||||||
| Gain/(Loss) on debt extinguishment, net | (5,149 | ) | - | - | (5,149 | ) | ||||||||
| Realized and unrealized (loss)/gain on derivative instruments, net | - | 1,952 | (1,952 | ) | 4.L | - | ||||||||
| Total other expenses, net | (64,779 | ) | (14,946 | ) | (7,778 | ) | (87,503 | ) | ||||||
| Income before taxes and equity in income of investee | $ | 173,679 | $ | 22,728 | $ | (9,608 | ) | $ | 186,799 | |||||
| Income taxes | (183 | ) | - | - | (183 | ) | ||||||||
| Income before equity in income of investee | 173,496 | 22,728 | (9,608 | ) | 186,616 | |||||||||
| Equity in income of investee | 60 | - | - | 60 | ||||||||||
| Net Income | 173,556 | 22,728 | (9,608 | ) | 186,676 | |||||||||
| Earnings per share, basic | $ | 1.76 | $ | 2.05 | $ | 1.48 | ||||||||
| Earnings per share, diluted | 1.75 | 1.96 | 1.45 | |||||||||||
| Weighted average number of shares outstanding, basic | 98,457,929 | 11,090,064 | 126,411,460 | |||||||||||
| Weighted average number of shares outstanding, diluted | 98,928,011 | 14,473,631 | 132,870,094 |
See accompanying notes to the unaudited pro forma condensed combined financial information.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
1. Description of transaction
On December 11, 2023, Star Bulk and Eagle announced that the companies entered into the merger agreement to combine in an all-stock merger with a fixed exchange ratio.
Pursuant to the merger agreement, which was unanimously approved by the boards of directors of both companies, Eagle shareholders will receive at the time the merger is completed 2.6211 shares of Star Bulk common stock for each share of Eagle common stock owned immediately prior to the closing of the merger and the Eagle equity awards outstanding at that time will be cancelled and converted into Star Bulk equity awards (please see “Treatment of Eagle’s Equity Awards” section of the proxy statement/prospectus filed with the SEC on February 12, 2024), which will result in the issuance or reservation, as applicable, of an estimated 27,953,531 shares of Star Bulk common stock, based on the estimated Eagle shares issued at closing, as analyzed under Note 3 below.
In addition, at the time of the merger’s completion 1,341,584 shares of Star Bulk common stock are expected to be issued in exchange for the 511,840 loaned shares of Eagle common stock (the “Eagle loaned shares”) outstanding in connection with the convertible notes (as described below). While Eagle’s share lending agreement with Jeffries Capital Services, LLC (“JCS”) does not require cash payment upon return of the shares, physical settlement is required (i.e., the loaned shares must be returned at the end of the arrangement). In view of this share return provision and other contractual undertakings of JCS in the share lending agreement, which have the effect of substantially eliminating the economic dilution that otherwise would result from the issuance of borrowed shares, the shares of Star Bulk common stock to be issued to replace the Eagle loaned shares are not expected to be considered issued and outstanding for accounting purposes and for the purpose of computing the pro forma combined basic and diluted weighted average shares or earnings per share in the pro forma condensed combined income statement. Upon the maturity date of the convertible notes on August 1, 2024, it is expected that these 1,341,584 newly issued shares of Star Bulk common stock, will be cancelled upon return.
On February 7, 2024, Eagle issued 1,098,819 shares of Eagle common stock to OCM Opps EB Holdings Ltd. (together with its affiliates, “Oaktree”), in connection with Oaktree’s election to convert $34,750 of its holdings of the convertible notes, pursuant to the terms of the indenture (as further discussed in Eagle’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on March 4, 2024). As a result, 2,880,114 shares of Star Bulk common stock, are expected to be issued on the closing date, pursuant to the merger agreement, in respect of these newly issued Eagle shares.
The remaining outstanding amount of the convertible notes is expected to be outstanding at the time of the merger’s completion. Therefore, the Star Bulk common stock expected to be issued in connection with the conversion or maturity of the remaining outstanding balance of the convertible notes of approximately 5.75 million is not considered part of the merger consideration.
A total amount of 33,702,905 shares of Star Bulk common stock are expected to be issued on a fully diluted basis, in connection with the merger’s completion and the maturity of the convertible notes.
The merger is expected to close in the first half of 2024, subject to approval by Eagle shareholders, which is scheduled for April 5, 2024, and satisfaction of other customary closing conditions.
As of December 11, 2023, when the merger agreement was executed, Eagle owned a fleet of 52 dry bulk vessels. Subsequent to December 31, 2023, Eagle entered into agreements to sell two vessels with deliveries expected to occur post-closing of merger during the second quarter of 2024. The combined company is expected to own a combined fleet of 163 owned-vessels on a fully delivered basis, 98% of which are fitted with Exhaust Gas Cleaning Systems (“scrubbers”), ranging from Newcastlemax/ Capesize to Supramax/ Ultramax vessels. The combined company will operate as Star Bulk Carriers Corp. and will be headquartered in Athens, Greece, while maintaining offices in Stamford, Connecticut, Singapore, Copenhagen, New York City, Germany and Limassol.
Both companies expect to maintain their respective dividend policies until the merger is completed. Following the closing of the merger, the combined company expects to maintain the Star Bulk dividend policy, as described in the Star Bulk Annual Report.
The merger values the entire issued and outstanding Eagle common stock as of February 29, 2024, including Eagle equity awards, at approximately $667,251, based on a Star Bulk closing share price of $23.87 on February 29, 2024 (the latest practicable date used for preparation of the pro forma condensed combined financial information). The exchange ratio is fixed and therefore the value of the merger consideration received by Eagle shareholders will ultimately be based on the closing price of Star Bulk common stock on the closing date and could materially change.
Star Bulk common stock is currently listed for trading on Nasdaq under the trading symbol “SBLK”, and Eagle common stock is currently listed for trading on the NYSE under the trading symbol “EGLE”. Following the closing, Star Bulk common stock will continue to be listed on Nasdaq and Eagle common stock will be delisted from the NYSE.
2. Accounting policies
During the preparation of the pro forma condensed combined financial information, management of Star Bulk performed a preliminary review and comparison of Star Bulk’s accounting policies with those of Eagle. Both Star Bulk’s and Eagle’s historical audited consolidated financial statements were prepared under U.S. GAAP. Certain adjustments have been made and included in the transaction accounting adjustments to conform presentation and accounting policies of Eagle’s historical financial statements with the presentation of Star Bulk’s historical financial statements. The resulting pro forma condensed combined financial information is unaudited.
Following the completion of the merger, management of the combined company will conduct a final review of Eagle’s accounting policies in an effort to determine if further differences in accounting policies are identified that require further adjustment or reclassification of Eagle’s income statement or reclassification of assets or liabilities to conform to Star Bulk’s accounting policies and classifications, as required by acquisition accounting rules. As a result of that review, management may identify differences that, when conformed, could have a material impact on the pro forma condensed combined financial information as presented herein.
3. Accounting for the merger
Following the guidelines of ASC 805 and ASU 2017-01, the merger was determined not to meet the requirements of a business combination. As of December 31, 2023, approximately 95% of the estimated fair value of Eagle’s total assets acquired, exclusive of cash, were comprised of similar vessels with similar risk characteristics and inventories on board these vessels. As a result, the merger is expected to be accounted for as an acquisition of Eagle by Star Bulk, under the asset acquisition method of accounting, in accordance with U.S. GAAP, which values the acquired assets and liabilities at the cost of the acquisition, including transaction costs, on the basis of their relative fair values. Star Bulk will be treated as the acquiror for accounting purposes.
The following represents the preliminary estimate of the merger consideration:
| Amounts | |||
|---|---|---|---|
| Eagle common stock | 9,326,231 | (a) | |
| Eagle common stock issued to Oaktree in February 2024 | 1,098,819 | Note 1 | |
| Equity awards | 239,759 | (b) | |
| # Eagle shares issued | 10,664,809 | ||
| Exchange ratio | 2.6211 | (c) | |
| Star Bulk common stock to be issued to Eagle shareholders | 27,953,531 | Note 1 | |
| Star Bulk closing price per share on February 29, 2024 | $ | 23.87 | Note 1 |
| Estimated consideration transferred | $ | 667,251 | |
(a) Issued and outstanding shares as of December 31, 2023.
(b) Eagle equity awards as of February 29, 2024, which will differ from the amount of such Eagle equity awards at the closing date.
(c) The exchange ratio is fixed, and the merger agreement does not contain any provision that would adjust the exchange ratio based on fluctuations in the market value of either Star Bulk’s or Eagle’s common stock.
For purposes of the pro forma condensed combined financial information, the fair value of Eagle’s identifiable tangible and intangible assets acquired and liabilities assumed are based on a preliminary estimate of fair value as of December 31, 2023 (the most recent practicable date used for preparation of pro forma condensed combined financial information) and such fair value estimate is in excess of the consideration amount. Star Bulk’s management has reassessed whether all of the assets acquired and all of the liabilities assumed were properly identified and determined that such fair value estimate remains in excess of the consideration amount. As the merger is accounted for as an asset acquisition, such excess of the fair value of net asset value acquired over consideration transferred, is allocated on a relative fair value basis to all qualifying assets, which were the vessels acquired. The calculation of such excess of the fair value of net asset value acquired over consideration transferred will ultimately be based on the closing date share price of the Star Bulk common stock, which could materially change the amount of the excess of the net asset value acquired over consideration transferred.
The amount of net assets acquired compared to the cost of consideration resulted in an excess value of $40,689 that, as discussed above, was allocated to qualifying assets on a relative fair value basis. The following table provides sensitivities to changes in the merger consideration due to changes in the share price of Star Bulk common stock on the closing date.
| Star Bulk price per share | Total consideration transferred | Fair value of net asset value acquired minus estimated consideration transferred | Adjustment to depreciation for the year ended December 31, 2023 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Pro forma base case scenario | $ | 23.87 | $ | 667,251 | $ | 40,689 | $ | (2,683 | ) | |
| Increase of 20% | $ | 28.64 | $ | 800,701 | $ | (92,761 | ) | $ | (10,782 | ) |
| Decrease of 20% | $ | 19.10 | $ | 533,801 | $ | 174,139 | $ | 5,417 |
4. Transaction accounting adjustments
| A. | Cash and cash equivalents: Transaction costs to be incurred directly by Star Bulk with respect to the merger are estimated at $5,000, as depicted<br> in the below table, and mainly consist of legal, advisory, audit and other professional fees. Please refer to the table below for analysis of the total adjustment in “Cash and cash equivalents”: | |||
|---|---|---|---|---|
| Pro forma condensed combined balance sheet adjustments: | As of December 31, 2023 | |||
| --- | --- | --- | --- | --- |
| Transaction costs | $ | (5,000 | ) | |
| Effect of the Post-Merger Refinancing | 9,812 | 4.I.iii) | ||
| Cash used for regular repayments of Eagle’s bank loans subsequent to December 31, 2023 and up to the merger closing date | (12,450 | ) | 4.I.ii) | |
| Cash and cash equivalents | $ | (7,638 | ) |
| B. | Restricted cash, current & Collateral on derivatives: The amount of $2,219 represents an adjustment made to conform Eagle’s financial statement presentation with that of<br> Star Bulk since Eagle presents separately the right to reclaim cash collateral or the obligation to return cash collateral from the fair value of derivative instruments. | |||
|---|---|---|---|---|
| C. | Inventories: Pursuant to Eagle’s accounting policies, inventories, which consist only of bunkers, are stated at cost which is determined on a first-in, first-out method,<br> while lubricants and spares are expensed as incurred. Pursuant to Star Bulk’s accounting policies, inventories consist of bunkers and lubricants, which are stated at the lower of cost or net realizable value. The amount of $3,713 represents<br> the estimated value of Eagle’s lubricants inventories and the respective adjustment made to conform Eagle’s accounting policies with those of Star Bulk. No transaction accounting adjustment was made to the pro forma condensed combined income<br> statement with respect to the corresponding effect of the consumption of Eagle’s lubricants inventories, as such amount was determined to be insignificant for purposes of the pro forma condensed combined income statement. | |||
| --- | --- | |||
| D. | Vessels and advances for vessel upgrades, net & Depreciation: The carrying value of Eagle’s vessels acquired was adjusted to fair value in accordance with ASC<br> 820, Fair Value Measurement, using a valuation obtained by a third-party vessel appraisal as of December 31, 2023. Below are described the adjustments made in relation to the above: | |||
| --- | --- | |||
| i) | An adjustment of $180,452 was made in order to bring the carrying value of the vessels to their estimated fair value of $1,086,164 and was then increased by the estimated transaction costs expected to be incurred<br> directly by Star Bulk of $5,000 as described above in Note 4.A and decreased by the excess of the fair value of net asset value acquired over consideration transferred of $40,689 as discussed in the Note 3 above. Please refer to the table<br> below for analysis of the total adjustment in “Vessels and advances for vessels upgrades, net”: | |||
| --- | --- | |||
| Pro forma condensed combined balance sheet adjustments: | As of December 31, 2023 | |||
| --- | --- | --- | --- | --- |
| Fair value adjustment | $ | 180,452 | ||
| Transaction costs | 5,000 | |||
| Excess of the fair value of net asset value acquired over consideration transferred | (40,689 | ) | ||
| Advances for ballast water systems and other assets | 1,414 | 4.D.iii) | ||
| Vessels and advances for vessel upgrades, net | $ | 146,177 | ||
| ii) | The adjustment of $2,683 reflects the additional depreciation of vessels on “Depreciation”, based on the transaction accounting adjustments in “Vessels and advances for vessel upgrades, net”, as described above in<br> Note 4.D.i). | |||
| --- | --- | |||
| iii) | The amount of $1,414 represents an adjustment made to conform Eagle’s financial statement presentation with that of Star Bulk’s, since Eagle presents separately advances for ballast water systems and other assets. | |||
| --- | --- | |||
| E. | Deferred drydock costs, net: The amount of $38,717, which is the carrying value of Eagle’s deferred drydock costs, net as of December 31, 2023, has been eliminated in the pro<br> forma condensed combined balance sheet as part of the fair value measurement. | |||
| --- | --- |
| F. | Depreciation & Dry docking expenses: Pursuant to Star Bulk’s accounting policies, dry docking and special survey expenses are expensed when incurred. Pursuant to Eagle’s<br> accounting policies, the deferral method of accounting is applied to drydocking costs whereby actual costs incurred are deferred and amortized on a straight-line basis over the period through the date the next drydocking is required to become<br> due. | ||
|---|---|---|---|
| i) | the amount of $13,999, which represents the amortization of Eagle’s deferred drydock costs, has been eliminated to conform Eagle’s accounting policies with those of Star Bulk; and | ||
| --- | --- | ||
| ii) | the amount of $15,098, which represents Eagle’s drydocking expenditures, has been recorded as expense in the pro forma condensed combined income statement to conform Eagle’s accounting policies with those of Star<br> Bulk. | ||
| --- | --- | ||
| G. | Convertible bond debt: The adjustment represents the elimination of the unamortized deferred financing costs of $229 as part of the fair value measurement of the convertible<br> notes assumed and the conversion of $34,750 liability under the convertible notes into 1,098,819 shares of Eagle common stock to Oaktree, in February 2024, as described in Note 1. The convertible notes’ estimated fair value of $124,920,<br> following the conversion of $34,750, based on market data, is significantly higher than its remaining principal amount of $69,369; therefore the excess of the fair value over the face amount of $55,551 was allocated to equity under ASC<br> 470-20. | ||
| --- | --- | ||
| Pro forma condensed combined balance sheet adjustments: | As of December 31, 2023 | ||
| --- | --- | --- | --- |
| Elimination of unamortized deferred finance costs | $ | 229 | |
| Conversion of Oaktree’s holding of convertible notes in February 2024 | (34,750 | ) | |
| Convertible bond debt | $ | (34,521 | ) |
| H. | Accrued liabilities: The amount of $8,659 represents an adjustment to reflect the estimated costs of severance payments pursuant to employment contracts of certain executives<br> and employees of Eagle in case of termination in connection with a change of control and/or termination of service without cause. | ||
| --- | --- |
| I. | Long-term bank loans: During March 2024, Star Bulk entered into separate committed term sheets for four loan facilities to refinance Eagle’s<br> existing long-term bank loans (the “Post-Merger Refinancing”). The aggregate amount expected to be drawn under these four facilities totals $385,312, net of financing fees, and is expected to be drawn on or around the date of the merger<br> completion and will be used to repay amounts currently outstanding under Eagle’s long-term bank loans. In connection with the Post-Merger Refinancing the below pro forma adjustments have been performed: | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| i) | the amount of $7,601 represents the effect of the Post-Merger Refinancing on “Current portion of long-term bank loans”, which is the incremental amount due within twelve months following the Post-Merger Refinancing, as compared to such<br> amounts due under Eagle’s current portion of long-term bank loans; | ||||||||||
| --- | --- | ||||||||||
| ii) | the amount $2,202 represents the effect of the Post-Merger Refinancing on “Long-term bank loans, net of current portion and unamortized loan issuance costs”, which is the incremental amount due, net of incremental financing fees, as<br> compared to such amounts due under Eagle’s long-term bank loans, as deducted by the amount of regular repayments of Eagle’s bank loans subsequent to December 31, 2023 and up to the merger closing date; | ||||||||||
| --- | --- | ||||||||||
| Pro forma condensed combined balance sheet adjustments: | As of December 31, 2023 | ||||||||||
| --- | --- | --- | --- | ||||||||
| Effect of Post-Merger Refinancing | $ | 10,248 | |||||||||
| Cash used for regular repayments of Eagle’s bank loans subsequent to December 31, 2023 and up to the merger closing date | (12,450 | ) | |||||||||
| Long term bank loans, net of current portion and unamortized loan issuance costs | $ | (2,202 | ) | ||||||||
| iii) | the amount of $9,812 (Note 4.A.) represents the effect of the Post-Merger Refinancing on “Cash and cash equivalents”, which is the excess proceeds, net of incremental financing fees and repayment of Eagle’s current long-term bank loans;<br> and | ||||||||||
| --- | --- | ||||||||||
| iv) | the amount of $8,564 (Note 4.M.) represents the effect of the Post-Merger Refinancing on “Interest and finance costs”, which is the incremental amount of interest expense calculated based on the terms of the facilities underlying the<br> Post-Merger Refinancing as compared to interest expense incurred on Eagle’s current long-term bank loans. | ||||||||||
| --- | --- | ||||||||||
| J. | Shareholders’ equity: The following increases/(decreases) have been made to total shareholders’ equity: | ||||||||||
| --- | --- | ||||||||||
| Capital | Accumulated deficit | Accumulated other comprehensive income/(loss) | Total Shareholders’ Equity | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Pro forma condensed combined balance sheet adjustments: | |||||||||||
| Costs of net assets acquired (Note 3) | $ | 667,251 | $ | - | $ | - | $ | 667,251 | |||
| Elimination of Eagle historic equity balances | (748,494 | ) | 156,727 | (8,451 | ) | (600,218 | ) | ||||
| Adjustment related to convertible notes (Note 4.G) | 55,551 | - | - | 55,551 | |||||||
| $ | (25,692 | ) | $ | 156,727 | $ | (8,451 | ) | $ | 122,584 |
| K. | Voyage expenses & Loss on bad debt: The amount of $504 represents an adjustment made to conform Eagle’s financial statement presentation with that of Star Bulk, since<br> Eagle presents credit losses and bad debts within “Voyage expenses” and Star Bulk presents such amounts within “Loss on bad debt”. | |||
|---|---|---|---|---|
| L. | (Gain)/Loss on forward freight agreements and bunker swaps, net: The amount of $1,952 represents an adjustment made to conform Eagle’s financial statement presentation with that of Star Bulk since<br> Eagle presents gains and losses on derivative instruments within “Realized and unrealized (loss)/gains on derivative instruments, net,” which is presented below “Operating income” and Star Bulk presents such<br> amounts within “(Gain)/Loss on forward freight agreements and bunker swaps, net,” which is presented above “Operating income”. | |||
| --- | --- | |||
| M. | Interest and finance costs: The amount of $2,738, as depicted in the below table, represents the elimination of the amortization of deferred financing costs in connection with the elimination of<br> unamortized deferred financing costs on i) Convertible bond debt and ii) Long-term bank loans, respectively. Please refer to the table below for analysis of the total adjustment in “Interest and finance costs”: | |||
| --- | --- | |||
| Pro forma condensed combined income statement adjustments: | As of December 31, 2023 | |||
| --- | --- | --- | --- | --- |
| Elimination of the amortization of deferred financing costs | $ | 2,738 | ||
| Effect of the Post-Merger Refinancing | (8,564 | ) | 4.I.iv) | |
| Interest and finance costs | $ | (5,826 | ) |