Frontline Ltd and Euronav NV are considering a merger that would produce the world’s biggest tanker fleet, as Russia’s invasion of Ukraine drives a recovery in the market.
The creation of a tanker behemoth — capable of carrying the equivalent of about 100 days of German daily oil demand — would come at an opportune moment. With shippers shunning Russian vessels, demand for other carriers is increasing, boosting a market that has languished for more than a year.
Frontline and Euronav shares have rallied this year, valuing a potential merger at more than US$4.2 billion.
Photo: Reuters
“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,” John Fredriksen, who owns a 39 percent stake in Frontline, said in a joint statement yesterday.
The two firms signed a term sheet on a potential combination with an exchange ratio of 1.45 Frontline shares for every Euronav share, the companies said in the statement.
That would result in Euronav shareholders owning about 59 percent of the combined entity and shareholders of Frontline owning 41 percent.
The proposal has been unanimously approved by the boards of both companies.
Should the deal go ahead, the combined group would continue under the name Frontline and operate from Belgium, Norway, the UK, Singapore, Greece and the US.
Euronav chief executive officer Hugo de Stoop would take the same position at the merged company.
The new entity would have 69 very large crude carriers and 57 Suezmax vessels and be capable of carrying about 225 million barrels of oil, data compiled by Bloomberg showed.
The new entity would counterbalance the giant trading houses and oil companies that hire vessels in the relatively fragmented tanker market.
“Consolidation is always good for the market,” said Halvor Ellefsen, a shipbroker at Fearnleys A/S in Oslo. “It tilts the balance more toward owners when negotiating rates.”
De Stoop in October last year said that Frontline and Euronav were not in talks about a merger, but that his company was open to such a move.
It is anticipated that Euronav would pay a total dividend of as much as 0.12 euros before the deal closes, with no effect on the exchange ratio.
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