The golden age of family-owned carriers is over, at least if one asks Hafnia Tankers CEO Mikael Skov and Teekay Corporation CEO Kenneth Hvid.
Alongside Michael Parker, Global Head of Shipping, Logistics and Offshore Industries at Citigroup, the two chief execs voiced harsh criticism against private and family-owned carriers and shipping companies: Where is the transparency? Where is the professional input offered by external investors? Where is the innovation brought forth by the pressure placed by shareholders and equity funds on their investments?
You're running your business according to sentiment, they said.
The opposing party similarly consisted of quite prominent names, including the vice chairman of container carrier Wan Hai Lines, Randy Chen, and the third generation of the family dynasty behind TCC Group, CEO Kenneth Koo. The two sides had in advance been asked to argue for the two opposing views.
The face-off between the two parties was part of Sea Asia in Singapore, where two teams of "politicians" were tasked with convincing the opponent and the audience of whether or not the golden days of private, independent shipowners are over.
The development we've been through could not have been achieved as a private company"
Namely, in broad terms, whether shipowners such as John Fredriksen or Henning Oldendorff have seen their best days come and go and are ultimately headed toward the sunset. The challenge happened as a parliamentary session arranged for the occasion, but the setup of the two teams was likely not an coincidence. And the same most likely applies to their standpoints.
Hvid, who has only served a few months as CEO of Teekay Corporation, has on the one hand taken over the reins of a shipping group that was born as a purely private company when Torben Karlshøj in 1973 laid the foundation of what is today one of the world's leading shipping groups.
However, in his argumentation, he had no doubt that the access to external capital, including from the four IPOs completed over the years, is one of the key reasons that Teekay's balance has since 2000 increased from around one billion dollars to USD 16 billion today, and that the group now has activities in gas, offshore, and tanker.
"Today the size of your company is crucial. The development we've been through could not have been achieved as a private company. Since I came to Teekay almost 17 years ago, the company's balance has grown by a billion dollars annually. One example was when we, back in the day, received a phone call from Exxon/Mobil related to entering the gas market. Today we have 83 gas vessels, of which 50 are in LNG. The results we're achieving with investors open doors at the banks, as the banks prefer to make arrangements with external owners rather than the privately owned," said Hvid.
We did not do it ourselves
"History is full of stories about people who, at first, bought a ship, after which the business grew. Our founder did the same, but shipping has changed," he added.
This hit home with Randy Chen of family-owned Wan Hai. He quickly responded by pointing to how easy it has been for the carrier to climb the rankings.
You are making your decisions with the heart"
"We have not done anything to move up the ranking other than that others have disappeared. In the end it is a matter of being in the market for 100 years or 30 years," said Chen, citing the discussion about whether the privately owned carriers operate with a long-term view, whereas equity funds and other external operators want quick returns.
"We often act like lemmings, we do this because Maersk did it first. It is ultimately about the fact that this is an industry where relationships matter. They remain intact because we meet in these rooms, and for instance we have partners such as PIL. Many are bigger than us and have gotten to that point without institutional capital. MSC built its empire brick by brick when others did not want to do so and became number two in the world due to will and family capital at stake. We believe there is a lot of time left for us to be in the industry," said Chen.
Better with investors
Mikael Skov already has several external investors in Hafnia Tankers, and the Danish carrier is still planning a listing in New York. He noted, as a "politician" at least, that the privately owned carriers are often run according to sentiment rather than according to sound business.
Mikael Skov, CEO, Hafnia Tankers
"I have worked with investors who push you. It's a great dynamic and you get good advice and insight into what's happening in other industries So our decision-making is better than before. You also get a better governance and more transparency as a public company, it would have been impossible to get the results we have today without going down the road we did. You are making your decisions with the heart," said Skov.
Finally, the parliament had to vote, and the vote came out in strong favor of the party pointing to a bright future for the privately owned carriers. 73 percent voted in favor.
In addition to the two shipowning families, the political team, arguing in favor of private ownership, consisted of Filippos Lemos, president of N.S. Lemos & Company. The debate was modulated by the speaker, BW Group Chairman Andreas Sohmen-Pao.
English Edit: Daniel Logan Berg-Munch