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Euronav and Frontline on Tuesday announced a definitive agreement to combine the two companies, potentially creating a leading independent crude tanker operator with a market capitilization anticipated at more than $4 billion.
The deal calls for a stock-for-stock combination based on an exchange ration of 1.45 Frontline shares for every 1 Euronav share. The previously announced combination has now been unanimously approved by all the boards of both companies.
The combined company will be named Frontline with Hugo De Stoop, the current CEO of Euronav, leading the group as its CEO. Lars H. Barstad, current CEO of Frontline, will hold a seat on the Board. The company will be incorporated and headquartered in Cyprus and will continue to operate from offices in Europe and Asia, including Belgium, Norway, UK, Singapore and Greece, and its shares will be listed on the Euronext Brussels, OSE and NYSE.
The combined group will create a leading global independent oil tanker owner and operator “with the management, capabilities, resources and scale to successfully capitalise on the opportunities presented by the new era in the sustainable shipping industry,” the companies said in a joint press release. It’s fleet will consist of 146 vessels consisting of 68 VLCC, 56 Suezmaxes, 20 LR2/Aframax and 2 FSO vessels,
Norwegian billionaire John Fredriksen, the largest shareholder in Frontline and second biggest in Euronav, has offered his full support for the merger.
“This transaction creates a clear market leader in the tanker market and will position the combined group for continued, sustainable shareholder value creation and the realisation of significant synergies,” said Fredriksen. “Frontline, with a fleet of 146 vessels, will be able to offer value enhancing services for our customers and increase fleet utilisation and revenues which will benefit all stakeholders. I am very excited and give my full support and commitment to this combined platform.”
The combined Net Revenue and EBITDA for the two companies in 2021 was approximately USD $668 million and USD $246 million, respectively.
The proposed combination is structured as a voluntary conditional exchange offer expected to take place in Q4 2022, possibly followed by a “squeeze out,” with the aim to then propose a merger of Euronav into Frontline to Frontline’s and Euronav’s shareholders as soon as possible. Based on Frontline share price USD 8.34 per share (as of US close 8 July 2022), the proposed exchange rate represents a value of USD 12.09 per Euronav share.
“The proposed Combination is a huge opportunity to take a leading position in the tanker industry as we seek to master the transition to a world of clean, safe and sustainable shipping,” says Hugo de Stoop. “This transaction represents a unique opportunity to deliver substantially better service to our customers, enhanced returns to our shareholders, and to provide a unique platform where people can fully express their talents while advancing our ambitious sustainability strategy towards decarbonisation of the shipping industry.”
Lars H. Barstad, CEO of Frontline, adds: “Frontline believes this transaction will form a powerful combination at an exciting point in the cycle. We are amalgamating a strong operational, technical and commercial platform to enhance shareholder value.”
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