Euronav and Frontline scrap $4.2 billion merger deal
An international shipping saga comes to an end as Norwegian tanker firm Frontline pulls out of Euronav's merger.
PHOTO: Euronav's Cedar and Cypress tankers. Euronav
John Fredriksen, the Norwegian-born Cypriot shipping magnate, and owner of Frontline has walked away from a merger with Belgian tanker operator Euronav after months of resistance from the Saverys family, one of Belgium's oldest shipping families.
Frontline and Euronav had agreed on a potential stock-for-stock combination between the two shipping majors last year based on an exchange ratio of 1.45 Frontline shares for every 1 Euronav share. A stock-for-stock merger is when two companies merge by exchanging stocks rather than cash towards the cost of aacquisition. This would have resulted in Euronav and Frontline shareholders owning approximately 59% and 41%, respectively, of the combined group, according to Frontline.
However, the Saverys family that owns a controlling 25% share of Euronav through its companies Compagnie Maritime Belge (CMB) and Sarveco, opposed the merger, calling it “unworkable and value-destructive” for both companies' shareholders.
Alexander Saverys, the chief executive of CMB and member of the Saverys family, wrote a letter to Euronav's supervisory board on 14 December calling for the merger to be terminated.
Saverys wrote, “If you continue to support the exchange offer by Frontline and if Frontline’s exchange offer would be successful, you will create a situation whereby Frontline controls more than 50% of Euronav without it being able to complete a full merger of the two companies. Euronav will then remain a separate legal entity with a separate listing on Euronext Brussels and the New York Stock Exchange.”
Saverys argued that the two separate competing companies could have the same chief executive and board, but with separate listings and minority shareholders, which would lead to “material inefficiencies.”
“Each commercial or investment decision (sale and purchase of vessels, chartering of vessels or newbuilding orders) will likely lead to conflicts of interest and complex governance issues,” he wrote.
Although Fredriksen holds an ownership interest of over 17% of Euronav, the Saverys' stake is large enough to block the merger, even though both boards approved it last summer. A deadlock between the tanker market magnates has now led the merger to be terminated.
Frontline’s chief executive Lars Barstad has expressed regret, saying that the merger would have “created the by far largest publicly listed tanker company.”
Looking forward, Euronav has said that market fundamentals that started to develop in the third and fourth quarters of 2022 are delivering what it thinks will be a "prolonged upcycle" for tanker markets.
By Konica Bhatt
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