Frontline and Euronav abandon $4.2bn merger

March 2023 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

March 2023 Issue

Despite being a highly anticipated combination that would have created the world’s largest publicly listed tanker company, tanker owner and operator Frontline plc has decided to terminate its $4.2bn deal to merge with rival Euronav.

As a result, the Norwegian-listed Frontline will not make a voluntary conditional exchange offer for all outstanding Euronav shares and will no longer seek a listing on Euronext Brussels. At the same time, the company has simultaneously withdrawn its intention to pursue such voluntary conditional exchange offer.

A world leader in the seaborne transportation of crude oil and refined products, Frontline owns and operates one of the largest and most modern fleets in the industry, consisting of VLCCs, Suezmax tankers and LR2/Aframax tankers. The company is listed on both the New York and Oslo Stock Exchanges.

“We regret that we could not complete the merger, as that would have created the by far largest publicly listed tanker company,” said Lars H. Barstad, chief executive of Frontline. “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 maximising dividend capacity per share.”

When announcing the merger on 10 July 2022, the two companies pledged to create a market-leading oil tanker group with 146 vessels, with an expected market capitalisation of more than $4bn and generated synergies of at least $60m a year.

Furthermore, the combined company 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. The transaction was expected to be completed in the first quarter of 2023 following Frontline’s relocation to Cyprus.

However, in response to the termination, Belgian-owned Euronav has determined that Frontline’s unilateral action has no basis under the terms of the combination agreement between the two companies signed in July, and that Frontline failed to provide a satisfactory reason for its decision to pursue termination.

“Euronav has complied with its obligations under the combination agreement and has done

everything in its power to make this transaction a success,” said the company in a statement. “Euronav’s supervisory and management boards are in the process of analysing the company’s options and will take appropriate action to protect and preserve the rights and interests of Euronav and its stakeholders, including, but not limited to, potential litigation or arbitration.”

The company also stated that it will continue to execute on its value creation strategy and is well positioned to seize the opportunities offered by improving market conditions and maximise its value potential for all stakeholders, as well continue to communicate and maintain a constructive dialogue with shareholders.

“Regardless of the combination taking place, the supportive and sustainable fundamental factors of the tanker markets have started to deliver what Euronav and most sector commentators believe will be a prolonged upcycle,” concluded the Euronav statement. “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.”

Fraser Tennant