Textainer deal part of hot container sector
Textainer, already the world's largest lessor of marine containers, will get even bigger in the latest of a bevy of deals in the container and chassis industry.
Textainer, which is 72 percent owned by the South African company Trencor, was hired to manage the former fleet of Capital Lease, the world’s eight-largest container leasing company. The deal, announced this week, will increase the size of the fleet Textainer manages by 500,000 TEUs to more than 2 million TEUs.
In a three-party deal, Textainer, with administrative headquarters in San Francisco, was hired to manage the Capital Lease boxes for an investment fund advised by Germany’s DVB Bank, which acquired Capital Lease this week.
It’s the second big deal for Textainer in about a year. It purchased the management contracts for the 317,000 TEU Gateway fleet in July 2006, boosting the total fleet under its management to nearly 1.53 million TEUs, with about 528,000 owned and the rest under long-term lease.
“In the past 20 years, we have either purchased, or assumed management of the container fleets of seven other lessors, now including Capital Lease,' said John Maccarone, Textainer's president and chief executive officer. We strongly believe that more leasing industry consolidation is justified, and are actively seeking other opportunities.”
Maccarone said the deal will help Textainer “ensure that we have the containers our customers want in the locations they want them. Our strategy is to be the most reliable supplier to our shipping line customers of containers in high demand locations.
“We do this not only by having the largest lessor-operated container fleet in the world ' but also by purchasing an average of over 90,000 TEUs of new containers each year,” he said.
The purchase by the DVB-advised intermodal fund CIF 3 is just the latest evidence of the mounting interest of investors in containers and chassis as well as ships and container terminals.
Ian Karan, chairman of Capital Lease, said CIF 3 was the successful bidder after an extensive process that involved other container lessors, banks, hedge funds and equity players.
The Capital Lease deal comes on the heels of last week’s purchase of Princeton, N.J.-based Interpool, the big chassis and container lessor, by an affiliate of Fortress Investment Group for about $797 million. Including assumed debt that deal was worth $2.4 billion.
Interpool said it believed it was the largest lessor of intermodal chassis in North America with a fleet 238,000 chassis at the beginning of the year. Its biggest competitor is Flexi-Van of Kenilworth, N.J., which said it has a fleet of more than 165,000 chassis. Interpool also owns and manages a container fleet of 756,000 TEUs, among the largest in the world.
Last September Fortress also purchased Carlisle Leasing International, which has a 125,000-TEU fleet of refrigerated containers, and has said it planned to expand into dry cargo. It reportedly may be interested in buying even more container assets.
Other recent and pending deals in the container and chassis business include:
* The May public stock offering of CAI International, another San Francisco-based container leasing company, which raised $87 million. About 52 percent of the company is still owned by Executive Chairman Hiromitsu Ogawa, who founded CAI in 1989. It has a fleet of 684,000 containers.
* TAL International Group of Purchase, N.Y., said in June it has retained Citigroup as an advisor to review strategic alternatives such as possible sale, acquisition or merger.
* Triton Container International, a large container leasing company owned by the Pritzker family, is also reportedly on the block, with Goldman Sachs shopping the company to potential investors.
* Shareholders of the Luxembourg-based Cronos Group, which owns and manages a fleet of more than 440,000 TEUs, are slated to vote on a management buyout of the company on Aug. 1.
“It has gone from being a fairly dull sector to pretty intense interest at the moment,” Maccarone said.
He attributes it to the large amount of money controlled by private equity investors and their interest in infrastructure, as well as the view that shipping is a key part of globalization.
In its prospectus for potential share buyers, CAI cited a Drewry Shipping Consultants report that projected the number of slots on the world’s container fleet was expected to increase 48.4 percent or 4.2 million TEU from 2006 to 2009.
“Given that we believe that container shipping lines require two TEUs of available containers for every TEU of capacity on their container ships, we expect that container demand should remain strong,” CAI's prospectus said. Maccarone said the current ratio, which he pegs at about 1.9 containers per slot, is leaner, as it once ranged from three to four per slot.
Textainer has “been the industry consolidator,” Maccarone said. “We think there is still quite a ways to go because while the container shipping liner business has consolidated there are still quite a few container leasing companies, and many of us are offering essentially the same thing.
“I think there is room for further consolidation, and we would like to do that because there is an incredible economy of scale as we add fleets,” he said.
While Textainer has been growing organically through the purchase of additional boxes, Maccarone noted that with the Capital Lease deal his firm is not buying the boxes, but managing them.
“As we add the management of a larger number of containers to our fleet, we don’t really have to add overhead expense to do that so that any fees that we add tend to be retained and fall to the bottom line. It is quite an attractive way of growing the business,” he said. “By being able to take on existing fleets we can grow a lot quicker and gain even more economy of scale.”
He does not think consolidation will result in higher equipment prices for liner companies or shippers, noting that there are still a dozen companies competing hard for the business.
He also notes that in recent years, the container leasing business has changed substantially. Where container lessors used to sign master leases that allowed carriers to return equipment at a wide variety of locations and sometimes after a short period of time, the standard lease today is a three to five years.
Without a change, lessees would be motivated to drop boxes in locations like North America, Africa or Australia and force leasing companies to pick up the repositioning costs.
Textainer is exploring a listing on the New York Stock Exchange.
Karan said he also has plans to expand Capital Intermodal, an affiliate that leases specialized containers like flat racks and tank containers, from its existing presence in Europe, the United States and Australia.