Economou Ends DryShips' Investment in Ocean Rig
Nine years after taking his publicly-traded dry bulk firm DryShips into offshore oil with an investment in Ocean Rig, George Economou has reversed course, and the firm has announced the sale of the last of its stake back to Ocean Rig once more.
In 2007, on Economou's initiative, DryShips purchased 30 percent of Norwegian deepwater drilling firm Ocean Rig for $405 million, a move that proved controversial with DryShips' shareholders. It paid a $4 million brokerage fee to Economou's privately-held Cardiff Marine for arranging the deal, raising accusations of self-dealing, and analysts speculated that Economou was using DryShips' balance sheet to facilitate his own investments in offshore drilling.
With Tuesday's announcement, DryShips' three-member board - recently reduced from a previous total of six, and headed by chairman and CEO Mr. Economou - unwinds that arrangement, selling back the entirety of the firm's current 40 percent stake in Ocean Rig to an Ocean Rig subsidiary for $50 million. (Mr. Economou is also chairman, president and CEO of publicly traded Ocean Rig, and holds five percent of its shares.)
DryShips intends to use the $50 million in proceeds from the sale to pay down a revolving credit facility provided by another entity controlled by Mr. Economou.
In addition, DryShips has sold three vessels, the Fakarava, Rangiroa and Negonego, to entities controlled by Mr. Economou, for an undisclosed sum; the disposal of the debt associated with the vessels plus the sale proceeds reduces DryShips' total bank debt by $102 million.
DryShips' shares fell 11 percent on the news, to a 52-week low of $1.93. Ocean Rig rose 15 percent, to $0.87.
Economou has been accused repeatedly of self-dealing in DryShips' operations at the expense of shareholders. His Cardiff Marine is deeply intertwined with DryShips' business, and brokers have described the terms of some of the two firms' arrangements as "mind-boggling" in the degree to which they favor his interests.
In its annual report for 2013, DryShips posted multiple "related-party transactions" with Economou-controlled entities; of these transactions, fees alone amounted to $76 million. He has suggested in the past that this is the way the firm is run, and shareholders may choose to sell their stakes if they do not approve.