John Fredriksen’s Frontline and the Saverys family-backed Euronav have revealed a merger creating a world leader in the tanker sector.
The move to combine the large VLCC and suezmax players comes after Fredriksen bought a 10% stake last year, prompting speculation about a tie-up.
The Saverys family has been rebuilding its holding in recent months too, becoming the largest shareholder.
A term sheet has now been signed and unanimously approved by the independent members of the companies.
The all-share deal will see Euronav own 59% and Frontline 41% of the combined group.
If the transaction can be sealed, the company would continue under the Frontline name, operating from Belgium, Norway, UK, Singapore, Greece and the US.
Euronav chief executive Hugo de Stoop will run the company.
John Fredriksen said: “A combination of Frontline and Euronav would establish a market leader in the tanker market and position the combined group for continued shareholder value creation in addition to significant synergies.
“The new Frontline would be able to offer value-enhancing services for our customers and increase fleet utilisation and revenues which would benefit all stakeholders. I am very excited and give my full support and commitment to this combined platform.”
The new company would have a market capitalisation of more than $4.2bn, with a fleet of 69 VLCCs and 57 suezmaxes, plus 20 LR2/aframaxes.
Consolidation achieved?
Fredriksen has long been keen on tanker consolidation, particularly in dire markets since the boom of 2020.
There had been no official confirmation of any contact between the companies since Fredriksen became a major shareholder, and it appears not a hint of any imminent deal had leaked out.
A Euronav spokesman told TradeWinds talks had taken place over "several months."
"We believe it is well timed in terms of counter cyclical investment," he added.
Euronav believes the deal is in line with what it did when it bought the AP Moller-Maersk VLCC fleet in 2014 and the merger with Peter Georgiopoulos' Gener8 Maritime in 2018.
"Time lines are hard to predict, but if you look at previous transactions, [that] will give a guide," the spokesman said.
A few misses
Fredriksen and Frontline have been less successful in pulling off deals, having swung and missed at US-listed owners Overseas Shipholding Group (OSG), DHT Holdings, General Maritime and its successor Gener8 in recent years.
The board will consist of seven directors: three from Euronav, two from Fredriksen’s private Hemen Holding and two new independent members.
It is anticipated that Euronav will pay total dividends of up to 12 cents per share before the closing of the business combination, with no impact on the exchange ratio.
The companies said the new expanded Frontline will have a strong balance sheet and access to attractive financing, supporting industry leading operational break-even levels for the combined fleet.
The group will be able to attract and retain world-class talent, the statement added.
There will also be significant benefits arising from a larger fleet in terms of improved overall utilisation and cost synergies which will lead to uplifted shareholder value.
The two sides also said they are aiming for the highest ESG standards in the industry
The companies are described as complementary platforms in a highly competitive environment.
‘Exciting point in the cycle’
Frontline chief executive Lars Barstad said: “Frontline believes this transaction would form a powerful combination at an exciting point in the cycle. The combination would create a strong platform to further enhance shareholder value for our investors.”
Carl Steen, chairman of Euronav, added: “A transaction between Frontline and Euronav is expected to deliver real value for both sets of shareholders.”
Potential boss De Stoop said the move is an exciting one for the tanker sector.
It created a company that “would be positioned to serve the needs of customers, support partners and drive technology and sustainability initiatives to lead the energy transition.”
Due diligence will have to be completed, as well as regulatory checks, before contracts are signed.
“Frontline and Euronav are working diligently to agree on and finalise an appropriate transaction structure for the potential business combination,” the two sides said.
They guided that it is premature to forecast when the deal could be sealed.
Law firm Seward & Kissel provided legal advice for Frontline.
