Risky bets schreef op 7 april 2022 13:29:
FRO/EURN: Highly anticipated merger – win-win for both – accretive
• This morning, Frontline and Euronav announce that the two companies intend
to merge. This is not unexpected, with Fredriksen making his mark in EURN
through the acquisition of a ~10% stake last fall. Frontline will remain the listed
entity, but EURN-CEO Hugo de Stoop will become CEO and as far as we can
see no offices will be closed down (‘continue to operate from Belgium, Norway.
UK, Singapore, Greece and the US’)
• Based on the proposed exchange ratio of 1.45x FRO share per EURN-share,
Euronav holders will control 59% and Frontline 41%. Based on NAV-for-NAV
the ‘fair’ ratio would on our numbers have been ~1.75x, but based on market
prices ~1.2x. So, positive to see that Frontline actually gets some benefit from
their premium pricing and is able to use this in an accretive manner
• We would see our FRO NAV increase from USD 7.1 to USD 8.03. Using the
historical premium of 1.35x a fair share price would be closer to USD 11
• Euronav holders will receive USD 0.12/share of dividends prior to closing
• In sum a positive transaction where we will see synergies both on revenues
(market consolidation) and costs. The fleet will be gigantic, with 69x VLCCs
and 57x suezmaxes (and 20x LR2s). NAV above USD 4bn and likely market
capitalization above USD 5bn. Clearly the go-to-name in tankers. Hemen will
control ~22% of the new company and have two seats at the BoD
• Positive for both companies, accretive to FRO-NAV. The share price reaction
this morning does however suggest that the market feels less confident in the
combined entity’s ability to maintain the steep FRO premium.