Horizon Lines Looking to Sell
The U.S. ocean cargo carrier Horizon Lines has entered into definitive agreements for a series of transactions that will result in the sale of the entire company, the first being the sale of its Hawaii business to The Pasha Group, followed by Horizon Lines’ subsequent acquisition by Matson, Inc.
Horizon Lines will also cease providing liner service between the U.S.A. and Puerto Rico by the end of 2014 due to continuing losses without the prospect of future profitability.
Horizon said that the decision to terminate its Puerto Rico service is independent of the sales agreement, as the company intends to cease operations between the U.S.A. and Puerto Rico whether or not the transactions with Pasha and Matson go through.
“We have a 56-year history in the Puerto Rico trade and truly value the relationships we have established,” said Steve Rubin, President and Chief Executive Officer of Horizon Lines. “Unfortunately, a combination of factors, including uncertain prospects for the Puerto Rican economy, losses over recent years and more expected going forward, aging ships that we cannot afford to continue to maintain or replace, and upcoming large capacity additions by two other carriers has led to this difficult but prudent and necessary decision.”
Horizon is currently serving the Puerto Rico trade with two vessels built in the early 1970s that have become increasingly costly to operate and expensive to maintain. As recently as 2012, Horizon operated four vessels, but the company had been forced to remove two vessels from the Puerto Rico service due to prolonged falling demand and the need to cut costs.
The two vessels Horizon Lines presently operates in the trade are both required to be dry-docked during 2015 at an estimated combined cost of USD 16-20 million. Furthermore, other carriers are scheduled to introduce four new, efficient vessels into service that will greatly expand capacity, further burdening Horizon Lines’ current limited ability to offer ongoing service that can remain competitive.
The company will cease liner service for domestic customers by the end of the year, however San Juan terminal services will continue to be provided into the first quarter of 2015.
Horizon Lines is expected to incur restructuring charges between USD 90 million to USD 100 million related to terminating its Puerto Rico operations.