146 oil tankers, the "giants"! Europe's two major tanker giants officially merge

2022-07-13 09:00

The merger of Frontline, an oil tanker subsidiary of Norwegian shipping magnate John Fredriksen, and Belgian oil tanker owner Euronav has been officially completed, creating a "giant" tanker company with 146 vessels.

On July 11, Frontline and Euronav announced the signing of a definitive agreement to merge through an all-stock transaction. The transaction is based on an exchange ratio of 1.45 Frontline shares for each Euronav share, with Euronav's existing shareholders expected to own 55% of the merged company and Frontline's existing shareholders owning 45%.

The merged company will be a leading independent tanker owner and operator globally, with a market capitalization exceeding US\$4 billion. The two companies' combined net income and EBITDA in 2021 were approximately US\$668 million and US\$246 million, respectively. The merger is expected to generate significant synergies of at least US\$60 million annually, including savings in sales, general and administrative expenses, and other costs.

The new company's fleet comprises 146 vessels, including 68 VLCCs, 56 Suezmax tankers, 20 LR2/Aframax tankers, and 2 floating storage and offloading units (FSOs). In the VLCC market, the combined fleet of the two companies accounts for approximately 8% of the market share, surpassing the 54 VLCCs (including 3 newbuilds) currently owned by COSCO Shipping, the world's largest VLCC owner.

The new company will reportedly retain the Frontline name, be headquartered in Cyprus, and continue operations in Belgium, Norway, the UK, Singapore, Greece, and the US. Euronav's CEO, Hugo De Stoop, will serve as CEO of the new company. The board of directors is expected to consist of seven members, including three independent current Euronav supervisory board members, two members nominated by Frontline's largest shareholder, Hemen Holding Limited, and two new independent directors.

With its complementary platforms, financial strength, and skills, the new company will be better positioned to deliver innovative, clean, and sustainable oil transportation solutions in a competitive environment. The expanded fleet size will enable the new company to better serve customers globally. Furthermore, considering rapid technological changes, including digitalization and the adoption of new low-carbon fuels, the new company will be able to leverage more resources to address these challenges and opportunities in energy transition.

Commenting on the merger, John Fredriksen stated: "The merger of Frontline and Euronav will create a clear market leader in the tanker market, enabling the combined group to consistently create value for shareholders and realize significant synergies. The new Frontline, with 146 vessels, will be able to provide value-added services to our customers, improving fleet utilization and revenue, which will benefit all stakeholders."

It is understood that last year, John Fredriksen acquired a 5.5% stake in Euronav through his subsidiary CK Limited and purchased 7.7 million shares through another subsidiary, Famatown Finance. After these two transactions, John Fredriksen held 19.8 million shares in Euronav, representing a 9.8% stake, which immediately sparked market speculation about a merger.

In April this year, Frontline and Euronav first announced their merger, which was met with opposition from Euronav's major shareholder, the Saverys family. Subsequently, the Saverys family, through its company Compagnie Maritime Belge (CMB), increased its stake in Euronav and proposed an alternative merger with CMB. However, John Fredriksen increased his stake in Euronav in June this year, bringing his stake close to that of the Saverys family, leading to a battle for control of Euronav.

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