Posted on December 19, 2022
Euronav reiterated its commitment to the planned combination with Frontline a day after the Saverys family renewed their public statements for the merger to be called off and new strategic talks to begin. In a public response, the Belgian tanker company confirmed that it plans to start the exchange offer in the first quarter of 2023 while warning that shareholders not participating in the offer might be disadvantaged by the future structure of the company.
“The fact that this development could take place has always been planned for in the proposed combination,” Euronav said responding to the Saverys’ announcement that they now owned a quarter of the voting stock, which enables them to prevent a full merger of Frontline and Euronav. “Under Belgian law, whilst a minority shareholding of more than 25 percent could potentially be used to seek to block a full merger, it cannot block an operational combination between two companies.”
Saying that the exchange offer is independent of any merger, Euronav indicated that it would proceed with the combination of the operations of the two companies. Euronav said it believes the transaction, which will create the largest operator of Suezmax tankers and a large fleet of ULCCs, is supported by a majority of shareholders. They cited the strong vote in May 2022 against the Saverys’ proposal to elect alternate members of the Euronav supervisory board that would have included Alex Saverys and his allies.
In addition to saying that they still believe it is a fair exchange ratio in the agreement, they also reiterated the strengths they see in the combined company. In addition to scale, they cite the ability to optimize operations in a competitive environment and the strength of the management combination. They also said the combined operation could “drive leadership in sustainable shipping,” while becoming a “must-have” stock in the crude tanker market.
Saying that they look forward to developing the combination further early in the new year, Euronav also cautioned shareholders not participating in the exchange offer. They warned that they may face challenges associated with reduced liquidity and investor demand due to the limited amount of stock remaining in the market.
The Saverys addressed this point in their letter to the board, highlighting that Hugo De Stoop, CEO of Euronav, had compared staying in the stock “a bit like locking yourself up in prison.” The family’s response that was the board “should focus on the creation of long-term value for all stakeholders and seek a solution through a constructive dialogue with your largest shareholder.”
In their opposition, they have consistently said that they do not believe the companies need to combine to create greater efficiency and that the combined entity would not have more pricing power for the transport of crude oil. They have said that the structure that will be created by blocking the full merger would be cumbersome and inherently have conflicts of interest.
Frontline’s shareholders are due to vote on the first step in the combination, redomiciling the company from Bermuda to Cyprus on December 20. Once the reincorporation is completed, Frontline will need to file its proxy and once it is declared effective the voluntary exchange offer can begin.
