Frontline (NYSE:FRO) has struck a $2.35 billion deal to buy a fleet of VLCCs from Euronav (NYSE:EURN), potentially bringing to an end its long-running dispute with CMB.
Frontline set out a plan to merge with Euronav in 2022. It has a stake of 26.12% in Euronav still, which it will now sell to CMB, for $18.43 per share.
In talks last year, Frontline valued Euronav at $12.09 per share.
Last week, Euronav had been trading around 13.9 euros ($8.8) in Belgium and $15 in New York. Today, it has reached 16.75 euros ($10.66) and $17.25 respectively.
Following the sale of the shares, CMB will own 49.05% in Euronav, controlling 53% of voting rights. After CMB has bought Frontline’s shares in Euronav, it will make a mandatory public takeover bid for Euronav. CMB will offer to buy shares at the same price, of $18.43 per share.
Frontline will use the cash from the share sale, plus various financing facilities, to buy 24 VLCCs from Euronav. The company said this was an “integrated solution to the strategic and structural deadlock”.
The purchase will transform Frontline into the largest publically owned tanker owner, with 89 vessels. The sale is due to close in the fourth quarter of 2023.
Frontline director John Fredriksen said he believed in building “best in class companies through consolidation. This transaction will solidify Frontline’s position as the leading publicly listed tanker company, and significantly expand our exposure towards modern efficient VLCCs at an opportune time in the cycle.”
The sale of the shares will raise $252 million. The company will also draw down a senior unsecured revolving credit of $275mn from Fredriksen’s Hemen Holding. This facility runs to January 2026, with an interest rate of 10%.
The company will also borrow $1.41bn from a group of banks, for five years.
Hemen has offered another $540mn, but Frontline may find an alternative source of funds.
The purchase had been predicted. Euronav was forced to issue a statement on the deal on October 5, after its shares were suspended.
The agreement also sees Euronav end its arbitration action against Frontline and associated companies. Euronav had complained that Frontline’s decision to end its merger plans, in January this year, was an unacceptable move.
While the move sees Frontline increase its focus on oil tankers, CMB said it saw Euronav’s future away from this sector.
CMB highlighted the importance of reducing emissions in its shipping fleet and optimising the existing fleet. Euronav has 70 vessels at the moment, which will reduce to 46.