Frontline Ltd. (Frontline) and Euronav NV (Euronav) have entered into a definitive Combination Agreement for a stock-for-stock combination based on an exchange ratio of 1.45 Frontline-shares for every 1.0 Euronav-share, which was unanimously approved by all the members of Frontline’s Board of Directors and by all members of Euronav’s Supervisory Board, reads an Euronav press release.
The agreement memorialises the principal aspects of the previously announced term sheet that was signed on 7 April 2022.
Definitive merger deal
The proposed Combination is structured as a voluntary conditional exchange offer by Frontline for all outstanding shares of Euronav at an exchange ratio of 1.45 Frontline shares for 1.0 Euronav share, possibly followed by a squeeze out, with the aim to then propose a merger of Euronav into Frontline to Frontline’s and Euronav’s shareholders as soon as possible thereafter. Based on Frontline share price USD 8.34 per share (as of US close 8 July 2022), the proposed exchange rate represents a value of USD 12.09 per Euronav share.
The combined group will be named Frontline, incorporated and headquartered in Cyprus and will in addition continue to operate from various offices in Europe and Asia including Belgium, Norway, UK, Singapore and Greece.
Following completion of the Tender Offer, the governance and senior leadership of the Group will be as outlined under the header “senior leadership and governance.”
Global independent oil tanker operator
Euronav and Frontline will endeavor to complete a full legal merger. Should, after completion of the Tender Offer, a squeeze-out or legal merger of both companies not yet be feasible, then during such interim period to the full merger, Euronav will retain its separate listings on Euronext Brussels and the New York Stock Exchange, and Euronav governance, as well as further integration joint projects and synergies, shall be further organized taking into account legal obligations of Euronext Brussels listed issuers, including article 7:97 of the Belgian Code of companies and associations.
- The combination will create a leading independent large crude tanker operator with an anticipated market capitalisation of more than USD 4 billion based on market values of the respective companies as of 8 July 2022, adjusted for the shares in Euronav currently held by Frontline.
- The combined net revenue and EBITDA for the two companies in 2021 was approximately USD 668 million and USD 246 million, respectively.
- The combined group will benefit from a balanced global vessel footprint with highly complementary platforms including 146 vessels consisting of 68 VLCC, 56 Suezmaxes, 20 LR2/Aframax and 2 FSO vessels. The best-in-class combined expertise of these businesses, supported by a strong balance sheet and access to attractive financing will support industry leading operational break-even levels for the combined fleet.
Significant synergies of a minimum of USD 60 million
The Combination is anticipated to deliver significant synergies of a minimum of USD 60 million on an annualised basis, including savings in selling, general and administrative expenses and other expenses resulting from (among other things):
- A larger fleet allowing for a better utilisation through, for example, use of combination voyages
- Economies of scale driven by cost synergies in respect of daily operational expenditures, dry-dock, and special project expenses
- Financial savings, primarily owing to a larger and stronger balance sheet improving the cost of debt
- The Frontline Board and Euronav Supervisory Board strongly believe the combined group will represent a premier and well-capitalised company through which investors can participate in the tanker market, benefiting from tangible economies of scale via pooling arrangements, procurement opportunities, reduced overhead and enhanced access to capital, as well as a highly liquid stock.
Both the Frontline Board and Euronav Supervisory Board consider the transaction to be in the best interests of all shareholders and have each unanimously approved the Combination Agreement, and subject to the absence of a superior bid (as defined in the takeover rules) the Euronav Supervisory Board has undertaken to recommend to its shareholders to tender their Euronav shares in the Tender Offer.
Lazard is serving as financial advisor to Euronav. Freshfields Bruckhaus Deringer LLP is serving as legal counsel to Euronav.
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