Horizon Lines
files for IPO

Horizon Lines Inc., an ocean-shipping company controlled by buyout firm Castle Harlan Inc., plans to raise as much as $287.5 million in an initial sale of shares to the public as cargo-line profits and stocks rise.

Horizon competes with Alexander & Baldwin Inc.'s Matson Navigation unit between the West Coast and Hawaii. Shares of Alexander & Baldwin, which got 56 percent of its operating profit from ocean shipping in 2004, rose 31 percent in the past year. Horizon, the second-largest shipper in Hawaii, also carries cargo to Alaska, Puerto Rico and Guam.

Proceeds from selling the Class A shares will be used to redeem preferred stock, pay a special dividend to holders of Class B shares and reduce debt, Charlotte, N.C.-based Horizon said in a Securities and Exchange Commission filing yesterday. The company didn't give the offering price, number of shares to be sold or date for the initial public offering.

Speculation about the IPO began to surface at the end of January when a Stamford, Conn.-based marine publication, Marine Money, reported that Castle Harlan was interviewing prospective underwriters for an upcoming public offering.

Last week, Matson announced that it had reached a $365 million deal with Kvaerner Philadelphia Shipyard to purchase two new containerships and other assets to inaugurate new service to Guam and China beginning next February. That deal squashed the hopes of start-up Hawaii shipper OceanBlue Express Inc., which had a preliminary agreement to buy those vessels and had hoped to compete against Matson and Horizon on the West Coast-Hawaii routes.

"Castle Harlan is trying to cash in on valuations that have ramped up in the past 12 months," said Nick Aberle, an analyst at San Diego-based Caris & Co. who rates Alexander & Baldwin an "average" and doesn't own the shares. "For Horizon to compete, they need to raise money. They have an old fleet that they need to refurbish."

Horizon spokesman Michael Avara declined to comment.

New York-based Castle Harlan, which also owns companies such as Morton's Restaurant Group Inc. and Ames True Temper Inc., bought Horizon from Carlyle Group in July for about $650 million. Carlyle had acquired Horizon 15 months earlier for $300 million. Carlyle is awaiting approval from Hawaii's Public Utility Commission on a $1.65 billion purchase of local telephone provider Verizon Hawaii.

Horizon, which entered the Hawaii-West Coast trade in 1987 as Sea-Land Service Inc., accounts for 37 percent of shipments from the mainland to Alaska, Hawaii, Guam and Puerto Rico.

Horizon's vessels average 28 years old, according to its filing. The average age for Matson's ships is 14 years, Aberle said.

Matson, Horizon and carriers such as Crowley Maritime Corp. compete in a shipping market where entry is controlled by a 1920 federal law that requires carriers to be U.S.-owned. Horizon's biggest customers include retailers such as Wal-Mart Stores Inc. and Costco Wholesale Corp.