Hawai’i Cargo Shipping Service Slims in Horizon Lines Sale

Matson Inc. and Horizon Lines Inc. announced Tuesday that they have entered into a definitive merger agreement pursuant to which Matson will acquire the stock of Horizon, including its Alaska operation.

Horizon also announced that it agreed to sell its Hawai’i operation to The Pasha Group for $141.5 million and intends to shut down its Puerto Rico liner operations by the end of 2014.

According to a Pasha Group statement, it will acquire all of Horizon Lines’ trade-line business in Hawai’i, including four Jones Act container ships. Once that transaction is finalized, Matson’s acquisition of Horizon Lines will be completed.

Horizon Lines’ Hawai’i service has run between Honolulu and six statewide ports, including the Port of Hilo and Port of Kawaihae. Pasha Hawai’i currently serves only the Port of Hilo on the Big Island. It also serves reaches Kahului Harbor on Maui and Nawiliwili Harbor on Kaua’i.

“Since Pasha entered the Hawai’i transportation circuit nearly 10 years ago, we have elevated the quality of customer service,” said George Pasha, IV, President and CEO of Pasha Group. “With this acquisition, we will supplement that service and provide an improved, more competitive offering on the Hawai’i trade lane.”

“First and foremost, Pasha is a full-service transportation company,” Pasha added, “and as such our primary goal is to enrich the transportation services available to our customers. A decade ago, we introduced the first pure car/truck carrier for the Hawai’i-Mainland trade lane, the Jean Anne, in response to customers’ needs. We now look forward to providing Pasha-quality service for even more of the people of Hawai’i.”

Matson is scheduled to acquire Horizon for $0.72 per fully diluted common share, or $69.2 million, plus the repayment of debt outstanding at closing. The total value for the transaction is $456.1 million, based on Horizon’s net debt outstanding, as of September 21, 2014.

“The acquisition of Horizon’s Alaska operations is a rare opportunity to substantially grow our Jones Act business,” said Matt Cox, President and Chief Executive Officer of Matson.

“Horizon’s Alaska business represents a natural geographic extension of our platform as a leader serving our customers in the Pacific. We expect this transaction to deliver immediate shareholder value through earnings and cash flow accretion via significant cost and operating synergies. We are also encouraged by the long-term prospects of the Alaska market, which mirrors Hawai’i in many operation ways, despite different underlying economic drivers. Both markets depend on reliable, superior and timely container cargo service as part of vital supply lifelines- hallmarks of the Matson brand,” Cox continued.

President and Chief Executive Officer of Horizon, Steve Rubin noted, “This transaction provides value for our shareholders while upholding our financial commitments. We wish the Matson team continued success in their new Alaska trade and we look forward to working with them to close this transaction and provide a seamless transition for our customers.”

On both ends, the Board of Directors unanimously approved of the transaction, and Horizon shareholders representing 55 percent of the fully diluted equity, which also represents 41 percent of the outstanding voting common stock on Nov. 11, have agreed to vote their shares in support of the transaction.

The transaction will be funded by Matson from cash on hand and available borrowing under its revolving credit facility. It is expected that the transaction will close in 2015 after the completion of Horizon’s sale of its Hawai’i Business, Horizon’s shareholder approval, and other customary closing conditions.

Horizon also announced Tuesday that it will cease operations and shut down its Puerto Rico domestic liner service. The decision to terminate its Puerto Rico service is independent of the transaction and Horizon intends to cease operation between the U.S. and Puerto Rico whether or not the transaction is consummated.