Frontline pulls the plug on the highly anticipated $4.2 bln merger with Euronav

Euronav-Frontline merger
Image credit Euronav

Norwegian tanker owner and operator Frontline has terminated the combination agreement it entered into with Belgian counterpart Euronav in July 2022, the company revealed on Monday in a sudden turn of events.

Image credit Euronav

The stock-for-stock merger deal would have created a global oil tanker operator valued at $4.2bn. Specifically, the combination deal was set to be completed in the first quarter of 2023 following Frontline’s relocation to Cyprus.

“Frontline is no longer pursuing the combination between Frontline and Euronav,” Frontline said.

“As a result, Frontline will not make a voluntary conditional exchange offer for all outstanding Euronav shares. Frontline will also no longer seek a listing on Euronext Brussels. Frontline has simultaneously with this notice published a separate notice withdrawing its intention to such voluntary conditional exchange offer.”

“We regret that we could not complete the merger as envisaged in July 2022, as that would have created the by far largest publicly listed tanker company,” Lars H. Barstad, CEO of Frontline said.

“At the same time, both companies have independently very large fleets of crude oil and product tankers, and are already enjoying economies of scale as evidenced by our respective recent financial reports.

“Frontline will with its efficient operations continue to capture value as this cycle unfolds, and remain focused on maximizing dividend capacity per share.”

The combination deal

The tie-up of the two giant tanker companies was believed to be the deal of the year in the tanker market, if not even the deal of the decade. It would have created a tanker super-power with a combined fleet of 146 vessels comprising 68 VLCCs, 56 Suezmaxes, 20 LR2/Aframaxes and 2 FSO units.

Furthermore, the combined company was targeting a leading position in the tanker industry. It was planned to increase shareholder value creation by reaping fruit from significant synergies and putting a massive focus on sustainable shipping as both entities had set ambitious decarbonisation targets

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Euronav issued a statement earlier this morning confirming that “Frontline has unilaterally decided to terminate the combination agreement” and confirmed that it had “received a letter pursuing such termination.”

Euronav added that it would examine the letter and reserve all rights and actions in this respect.

“Regardless of the combination taking place, the supportive and sustainable fundamental factors of the tanker markets have started to deliver (during Q3 and Q4 2022) what Euronav and most sector commentators believe will be a prolonged upcycle. Such favourable conditions coupled to Euronav’s strong balance sheet, best-in-class operating system with the most developed sustainability platform in the sector positions our company well for the future,” Euronav noted.

The proposed deal was creating a lot of noise

Frontline’s decision comes on the heels of a heated debate over the deal as Euronav’s biggest shareholder attempted to prevent the merger from taking place.

In December 2022, Euronav confirmed that its shareholder Compagnie Maritime Belge (CMB) sought termination of the company’s tie-up with Frontline.

However, Belgian tanker shipping major defended the deal at the time, saying that the majority of its shareholders were supporting the combination. The company was confident that, all the noise aside, the merger would come through.

The anticipated share exchange deal was sparking interest from key investors such as Morgan Stanley (acquired a 5.25% stake) and Goldman Sachs (4.65 % stake), which increased their shares in Frontline ahead of the planned exchange offer.