Tanker majors Euronav, Frontline to merge; to control at least 146 ships

Global tanker majors Euronav and Frontline announced April 7 that the two companies plan to merge, which would result in the consolidation of 146 ships in the VLCCs, Suezmax and Aframax segments.

The combination will create one of the world’s largest global oil tanker operator with 69 VLCCs, 57 Suezmaxes and 20 Aframax-LR2 tankers, the two companies said in a joint statement.

The merger is significant since it comes at a time when global tanker rates are on a path of recovery after reeling under downward pressure for almost 20 months, when the shipping cycle was on a downtrend.

“This transaction would form a powerful combination at an exciting point in the [shipping] cycle,” Frontline’s CEO Lars H. Barstad said in the statement. The merger is subject to necessary approvals and agreement on a transaction structure, among others.

The combined company will operate under the name Frontline, with Hugo De Stoop as CEO. Stoop is currently CEO of Euronav,

Market participants expect the merger will increase the negotiating power of owners, while offering their ships on both period charters and spot voyages.

Prior to the merger, Frontline owned and operated a fleet that included 19 VLCCs, with another six due for delivery in 2022, 27 Suezmaxes and 20 LR2 tankers.

Euronav owned and operated a fleet that includes, among others, 41 VLCCs and 27 Suezmaxes, while another half a dozen ships of such sizes are under construction.
“It is better for companies such as these to consolidate in this manner to boost freight rather than order new ships,” a VLCC broker said.

He cited the example of BW Group’s Hafnia Tankers, recently taking control of LR2s belonging to Scorpio Tankers, as another example of such consolidation.

The merger will result in Euronav and Frontline shareholders owning approximately 59% and 41%, respectively, of the combined group, the company statement said.

It will lead to the in the market capitalization of more than $4.2 billion based on the two companies’ market values, as of April 6.
Source: Platts