[4] Merchant Navy's dam, Legally Bay, showed good racing ability, winning the Group 3 Sweet Embrace Stakes in 2003.
[7] A month later at Sandown Racecourse the colt started odds on favourite for a handicap race over 1400 metres and won again, beating the Godolphin runner Platinum by a length.
[9] On his three-year-old debut Merchant Navy started 5/2 favourite for the Group 3 HDF McNeil Stakes over 1200 metres at Caulfield Racecourse on 2 September.
[11] Three weeks later he was strongly fancied for the Group 1 Golden Rose Stakes at Rosehill Racecourse but never looked likely to win and came home tenth of the fourteen runners behind Trapeze Artist.
Two days after the race Ciaron Maher received a six-month suspension after it was revealed that several of his trainees were owned by the "convicted conman" Peter Foster,[12] and his training duties were given over to Aaron Purcell.
On his first start for his new trainer Merchant Navy, wearing blinkers for the first time, was made an 18/1 outsider for the Coolmore Stud Stakes, a Group 1 race for three-year-olds over 1200 metres at Flemington on 4 November.
[15] After a break of over three months Merchant Navy returned on 10 February at Caulfield when he was matched against older horses for the first time in the Rubiton Stakes.
He started slowly but moved up into third place entering the final furlong before staying on strongly to take the lead in the closing stages and win by a length from Spirit of Valor.
[16] At Royal Ascot on 23 June Merchant Navy contested the Diamond Jubilee Stakes and started at odds of 4/1 in a twelve-runner field.
Although City Light appeared to have won the race the photo finish revealed that Merchant Navy had hung on to prevail by a short head.