By Jonas Cho Walsgard
(Bloomberg) — Billionaire John Fredriksen is merging the two oil tanker companies he split up more than three years to create a market leader.
Frontline Ltd. will buy Frontline 2012 Ltd. by issuing 584 million shares worth almost 12 billion kroner ($1.5 billion). Shareholders in Frontline 2012 will receive 2.55 Frontline shares for each share. That implies a 31 percent premium based on Wednesdays closing prices.
“By merging Frontline and Frontline 2012 we will regain Frontline’s position as a leading tanker company,” John Fredriksen, chairman of both companies, said in a statement. “The combined company will have a large fleet and a strong balance sheet which puts us in a position to gain further market share through acquisitions and consolidation opportunities.”
Fredriksen split Frontline in 2011 to withstand falling tanker rates and avoid default. Frontline 2012 was given control of newer vessels and outstanding orders at ship yards. The combined company will have a fleet of about 90 vessels and a newbuilding program of about 22 vessels scheduled for delivery from 2015 to 2017.
“With the current strong tanker market and attractive cash break even rates, we believe the combined company will generate significant free cash,” Fredriksen said. “The intention is to pay out excess cash as dividends at the board’s discretion.”
The merger is expected to close as soon as possible after special general meetings to be held in the fourth quarter. After the transaction Fredriksen’s Hemen Holding and Ship Finance will own 52 percent and 7 percent, respectively of the combined company.
©2015 Bloomberg News