Frontline, under the leadership of John Fredriksen, is poised to emerge as the largest publiclylisted pure-play tanker owner following its acquisition of 24 Very Large Crude Carriers (VLCCs) from Euronav for $2.35 billion.
This deal brings to a close the protracted battle for control of Euronav, which had been ongoing between Fredriksen and the Savery family. Last year’s attempted merger between Frontline and Euronav ultimately fell apart. As part of this agreement, Frontline and Fredriksen’s Famatown will also sell their 26.12% stake in Euronav to CMB, owned by the Savery family, at a price of $18.43 per share.
Frontline has agreed to purchase 24 VLCCs, with an average age of 5.3 years, from Euronav. Of these vessels, 22 were constructed at Korean shipyards, and nine are equipped with scrubbers.
This acquisition will expand Frontline’s fleet from 65 vessels to 89, making it the largest publicly-listed tanker company in terms of overall deadweight tonnage.
John Fredriksen expressed his commitment to building best-inclass companies through consolidation, stating that this transaction will solidify Frontline’s position as the leading publicly-listed tanker company and significantly increase its exposure to modern and efficient VLCCs, coming at an opportune time in the industry cycle.
Frontline highlighted the limited VLCC newbuilding orderbook, which currently represents just 2% of the existing fleet. Furthermore, the long lead time for owners seeking to order new tonnage due to shipyards being occupied with orders for other types of large vessels was noted.
Lars H. Barstad, Chief Executive Officer of Frontline Management, emphasized the company’s ability to act decisively on large-scale fleet transactions with the support of their largest shareholder and key relationship banks. The structure of the deal is expected to enhance Frontline’s operating leverage as the tanker market faces historically low deliveries of new capacity.
The funding for the acquisition of the 24 VLCCs will come from a combination of sources, including $252 million from the sale of shares in Euronav. Additional funding will be obtained through a drawdown under the existing $275 million senior unsecured revolving credit facility, a new five-year senior secured term loan facility of $1.41 billion from a consortium of banks, and a subordinated unsecured shareholder loan of up to $540 million offered by Fredriksen’s Hemen Holdings.
Euronav has dropped the legal action it had taken against Frontline after the latter withdrew from the planned merger in January of this year.
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