SPAC Going Operational: Marathon Acquisition & Global Ship Lease (MAQ)

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Marathon Acquisition Corp. (AMEX: MAQ, MAQ.U, MAQ.WS), special purpose acquisition company, or SPAC, has announced that it will effect a merger with Global Ship Lease in order to become an operation entity.  This is a rather large SPAC deal too as this values Marathon at approximately $1 Billion.  Global Ship Lease is a rapidly growing containership charter owner and is currently a subsidiary of CMA CGM S.A. of France, the world’s third largest container shipping company.

Global Ship Lease is incorporated in the Marshall Islands, and it commenced operations in December 2007 to own and charter out containerships under long-term, fixed rate charters world-class container liner companies.  Global Ship Lease currently owns 12 vessels and has contracts in place to purchase an additional five vessels from CMA CGM expected for delivery between December 2008 and July 2009.

The approximate $1.0 billion value need approval of stockholders and warrantholders, and Marathon’s stockholders will own approximately 66% of Global Ship Lease and CMA CGM will own approximately 34%.  All of the contracted vessels are under long-term charters to CMA CGM with an average remaining charter term of approximately 11 years.

Global Ship Lease intends to pay quarterly dividends beginning with an initial base dividend of $0.18 per share after the merger payable for the third quarter of 2008.  The company also announced that it plans to boost its 2009 dividend (after Q3) from $0.72 annualized to a new $0.76 annualized dividend. Based on Marathon’s closing share price of $7.87 per share as of March 20, 2008, the resulting implied dividend yield is 9.1%. Marathon founders and CMA CGM will collectively own 10 million non-cumulative subordinated shares which will Not be entitled to receive dividends for the period prior to the first quarter of 2009. Thereafter and upon delivery of the 5 additional vessels, dividends will be paid on subordinated shares provided that common stockholders have received full payment of all base dividends.

After the delivery of all 17 contracted vessels, Global Ship Lease will have $511 million of net debt outstanding (approximately $173 million of which will be outstanding at closing of the merger) under its $800 million credit facility priced at LIBOR plus 75 to 110 bps, based on certain leverage levels.  Existing lenders have already consented to the transaction.

Marathon Acquisition closed at $7.87 on Thursday and it cam public in November 2006.  Its current market cap is listed as $388.8 million.

Jon C. Ogg
March 24, 2008