BW LPG splashes US$1Bn for Fredriksen's Avance Gas VLGC fleet

Bermuda-incorporated Avance Gas has agreed a deal to sell its dozen very large gas carrier (VLGC) fleet of vessels to Singapore-headquartered BW LPG.

In return for the Avance Gas VLGCs, the John Fredriksen-controlled company will receive some US$1.05Bn in cash and shares from BW LPG, with US$585.4M in cash and more than 19M shares in BW LPG.

"Following the issuance of the total share consideration, Avance Gas will become a 12.77% shareholder in BW LPG," a statement from BW LPG said.

The vessels include four 91,000-m³ dual-fuel VLGCs, two built in 2022 and two in 2023, and eight 2015-built 83,000-m³ VLGCs, of which six are fitted with exhaust gas cleaning systems, or scrubbers.

"The fleet of Avance Gas is today a bit sub-scale and we have therefore found it more attractive for our shareholders to take advantage of the relatively high secondhand prices and sell the VLGC fleet to BW LPG," Avance Gas chief executive Øystein Kalleklev said.

During 2024, the company has successfully agreed the sale of 16 VLGCs worth a combined profit of about US$435 million, the company said.

"We find BW LPG well positioned with an integrated business model priced at a relatively modest price and this transaction will further strengthen BW LPG with both cost and income synergies. In our pragmatic view, it doesn’t matter whether the ships are black or light green as long as they are generating cash," Mr Kalleklev said.

BW LPG said the vessel purchase will add scale to its fleet, taking the number of VLGCs it owns and operates to 53, with 20 of those being dual-fuel. 

"This further solidifies BW LPG’s position as the world’s leading owner and operator of VLGCs, with the largest number of LPG dual-fuel powered VLGCs," the company said.

The deal is expected to close by the end of the year on a vessel-by-vessel basis.

“This strategic transaction supports BW LPG’s ambition to serve our customers with enhanced shipping and product delivery options in the fast-growing LPG space. The addition of these 12 vessels will result in an expanded fleet, greater flexibility, and are expected to be accretive to earnings based on our market view. They will also support our product trading and terminal activities,” BW LPG chairman Andreas Sohmen-Pao said.

BW LPG chief executive Kristian Sørensen said, “Today’s transaction marks a major milestone in BW LPG’s history and reflects our ability to execute large fleet acquisitions by maintaining a robust balance sheet and using the BW LPG share as an attractive currency. The acquired vessels will further enhance our commercial scale and increase our operational leverage in a market we expect to be strong in the coming years and as such solidify earnings and dividend potential.”