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Horizon Lines Inc (OTCMKTS:HRZL) Amends Sale Agreement

Horizon Lines Inc (OTCMKTS:HRZL) has moved to iron out potential problem areas in its sale agreement with Matson Inc (NYSE:MATX). Some investors had challenged the planned merger, mostly citing that the buyout offer was insufficient. The investors also claimed that the termination fee in case the merger failed was too high. Horizon said the modification to its planned merger agreement awaits court approval.

One of the major adjustments to the earlier merger agreement is a reduction in the breakup fee. The amended agreement states that Horizon Lines Inc (OTCMKTS:HRZL) would pay $9.5 million to Matson if a deal fails to happen under certain circumstances. The previous termination fee was about $17.2 million.

The class-action lawsuit brought up by disgruntled shareholders also challenged other parts of the merger agreement including the total sales price. Additionally, the shareholders claimed that there were misleading details about the agreement.

Court approval

It remains to be seen whether the court would approve the modified buyout agreement. However, Horizon Lines Inc (OTCMKTS:HRZL) has made it clear that it would vigorously contest a rejection of the settlement. According to Horizon, the claims raised by the disgruntled shareholders are without merit but they decided to amend the agreement to avoid costs, burdens or any risks of litigation.

Shareholders of Horizon Lines Inc (OTCMKTS:HRZL) are expected to vote on the buyout deal on Feb. 25. According to Horizon, the settlement does not impact its buyout price.

Buyout price

Horizon is selling itself for $598 million. The company’s Hawaii business will be taken over by Pasha for $141.5 million, and Matson will acquire its Alaska business for $456.1 million.

The buyout is coming at a time when Horizon Lines Inc (OTCMKTS:HRZL) has had several problems in the recent years, including fine for price fixing, aging fleet and soaring debt. The company’s fleet had attained an average age of 37 years, necessitating update to comply with regulations by 2020.

In addition to the aging fleet problem, Horizon is also deep in the red, having $100 million in debt obligations maturing in 2014 and 2015. There is another $600 million in debt due 2016. The deal with Matson could not have come at a much better time for Horizon.

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