Posted on November 7, 2022
While expressing continued support for the merger and delivering “a scalable and influential crude tanker platform,” management of tanker operator Euronav reported that the agreed upon combination with Frontline is taking longer than planned. Frontline’s tender offer, expected to commence in the fourth quarter of 2022 is now expected to take place in Q1 2023. The company provided the update while also reporting a strong rebound in its financial results based on the improving tanker market.
“The combination between Frontline and Euronav is a complex transaction which requires a number of regulatory approvals from various authorities,” the company said in explaining the revised indicative timeline. The two companies signed a final combination agreement in July 2022 that calls for Frontline to commence a voluntary conditional exchange offer for all outstanding shares of Euronav as the first step in the process. At a later date, it is expected that Frontline would be able to conduct a “squeeze out” forcing the remaining shareholders to accept the deal and complete the merger.
Hugo De Stoop, CEO of Euronav, said that the transaction remains on track, but cited the complexity of the steps. Frontline announced that it will relocate from its incorporation in Bermuda to Cyprus, a member state of the European Union, prior to the launch of the tender offer. However, this requires shareholder approval and for that Frontline had to file a prospectus detailing the aspects of the relocation with the U.S. Securities and Exchange Commission. Once the prospectus is declared effective, Frontline can schedule the shareholder vote and if it receives approval complete the final regulatory steps for the relocation.
The next step will require the filing of the tender offer with the Belgian and U.S. authorities. Only once the documents have been approved, or declared effective, can the tender offer commence.
While the companies anticipate acceptance by the institutional shareholders, the Saverys family remains in opposition to the proposed combination. After failing in their efforts to contest the agreement, the family has continued to call for discussions for a compromise solution. At the same time, between July and early October, the family’s Compagnie Maritime Belge paid $44 million to acquire an additional 2.8 million shares of Euronav. According to a shareholder filing with the SEC, they hold a total of over 43.7 million shares or 21.7 percent of the ordinary shares of Euronav. They have steadily increased their holdings since reporting a position of 16.9 million shares, or just 8.4 percent, at the beginning of 2022.
While the contest for final control of Euronav looms for the new year, the company today reported strong improvements in its financial performance. Revenues more than doubled while the company swung from a loss a year ago to a profit of over $16 million in this year’s third quarter.
“Over the recent months, improving tanker market fundamentals have, together with geopolitical events, driven sustained and significant freight rate improvements which are broad and well supported in all parts of the large crude tanker market,” said De Stoop. “Firstly, ton miles continue to grow owing to primary and secondary effects from Russian crude transportation dislocation. Secondly, the demand for crude is underpinned by the relative low pricing of oil in the current energy mix. Finally, crude supply growth is reinforced by non-OPEC barrels from the Atlantic basin. We believe that potential headwinds from OPEC production cuts will not translate into factors capable of disrupting the current momentum.”
Euronav also points to its strong position having moved aggressively with a modernization of its fleet including being one of the few operators to order new crude oil tankers. The company has eight new vessels on order, reporting recently that it had entered into an agreement for two more Suezmax Eco-type tankers due for delivery in 2024. The industry’s orderbook stands at 25-plus year lows and Euronav points to the lack of shipbuilding slots before 2025 and 2026 at the major shipyards.
The planned combination with Frontline would create the largest operator of Suezmax and VLCC tankers.