Will Matson Survive?

by Michael Hansen

Respected U.S. shipbuilding expert, Tim Colton, commented this morning on the news that Matson Inc. (MATX) is now listed on the New York Stock Exchange (NYSE) as an independent company and is formerly no longer part of Alexander & Baldwin Holdings / Alexander & Baldwin Inc.

Colton questions what the future of Matson might be and whether or not they will be able to survive? He notes that Matson is locked into a protected Jones Act trade with old ships they can’t afford to replace in compliance with the U.S.-build requirement of the Jones Act.

Part and parcel of being locked in to a protected domestic trade, it is unlikely that Matson will be able to find new opportunities in its core business of ocean container transportation. The domestic U.S. container shipping market is very limited and all the current operators face the same problem of extraordinary domestic ship replacement costs. As a protected domestic operator, Matson would not be competitive in international trade. Matson discovered this the hard way with their failed Trans-pacific Asia direct service, which was shutdown last year due to continuing losses.

Given the ship replacement cost Matson is facing – probably on the order $750 million; the real question is will Matson go the way of Horizon Lines in to financial decline?

The new Matson’s ordinary shares traded at $26.50 In aftermarket trading on Friday, June 29, 2012, opened at $27.74 this morning Monday, July 2, 2012, and closed today at $27.83.

As Colton noted, it will be interesting over the next 12 to 18 months to see whether the major A&B shareholders and executives sell off their Matson shares.

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Pacific News Center: Ship Building Expert Questions Whether Matson Will Survive

From http://www.coltoncompany.com/

Colton: It's Day 1 for the New Matson

Matson Navigation Company, Inc., is now on its own, a stand-alone shipping -and-logistics company trapped in a protected and proscribed market, surrounded by customers who don't like paying its exorbitant rates and unable to afford modern ships. Will it flourish? Will it even survive? Watch closely. The new company's ticker symbol is MATX. Its former parent, Alexander & Baldwin, (ALEX), closed on Friday at $53.25. After the market closed, ALEX was trading at $25.17 and MATX at $26.50. Today's trading will tell us what A&B's stockholders think about the spin-off. July 2, 2012.

Colton: New Matson Afloat Already

Alexander & Baldwin doesn't officially split in two until the end of the month, but the new Matson - Matson Navigation Company, Inc. - is already off and running. Read the separation information here and visit the new web site here. Well now, how do we think Matson will do in this new life it has ahead of it? Let's face it, the A&B folks are no dummies: the reason for the split was obviously to unload Matson. But the new Matson won't have the financial muscle that it had as part of A&B and it still has some old tonnage to replace, plus the need to placate a lot of non-contiguans who have worked out that the Jones Act costs them money. We shall see how they do. June 20, 2012.