Carbon emissions are causing divisions in the boardrooms of US-listed tanker companies, with directors using decarbonisation strategies to ward off corporate raiders
It was not so long ago that an attempt to take over a tanker company or force through a hostile takeover was predicated on “shareholder value” with the raider stressing to the current shareholders the lack of growth in dividends or other financial metrics as evidence the current board of directors was failing in its duty to maximise returns to shareholders.
In 2022, the weapon of choice is decarbonisation, which has grown from an obscure term five years ago to one that now keeps CEOs awake at night. The new approach to merger and acquisitions has been highlighted by John Fredriksen’s attempts to take control of US and Belgium listed large tanker operator Euronav and his raid on the shares of US tanker company, International Seaways.
The issue started in April 2022, when Frontline and Euronav jointly announced they were combining fleets and operations. The combined group is to continue to trade under the name Frontline, which is listed on both the New York and Oslo Stock Exchanges under the symbol FRO.
“CMB would like to transform Euronav into a Europe-based marine and industrial cleantech powerhouse”
Under the combination deal, Frontline will have a fleet of 69 VLCCs, 57 Suezmax tankers, and 20 LR2/Aframax tankers. Euronav’s CEO, Hugo De Stoop will head the group as chief executive.
In a statement, Mr Fredriksen said: “A combination of Frontline and Euronav will establish a market leader in the tanker market and position the combined group for continued shareholder value creation in addition to significant synergies.”
He added: “The new Frontline will offer value-enhancing services for our customers and increase fleet utilisation and revenues which will benefit all stakeholders. I am very excited and give my full support and commitment to this combined platform.”
Euronav chief executive Hugo De Stoop said: “This transaction marks an exciting development for the tanker industry, creating a leading tanker company positioned to serve the needs of customers, support partners and drive technology and sustainability initiatives to lead the energy transition.”
This announcement was swiftly followed by a statement from Euronav’s major shareholder, Compagnie Maritime Belge (CMB), which founded Euronav some 30 years ago. The Saverys family, which controls CMB, upped their stakes to more than 13% of Euronav’s total shareholdings in the last six months.
The Saverys family believes the merger will reinforce the status quo when decarbonisation demands a new approach. In a statement, the family said: “CMB questions the current strategy of Euronav, which focuses solely on the transportation of crude oil in a world where decarbonisation is of paramount importance. CMB does not believe a combination with Frontline will create added value for Euronav’s stakeholders.”
It added: “CMB would like to transform Euronav into a Europe-based marine and industrial cleantech powerhouse, with a diversified fleet. The proceeds of Euronav’s current business should be reinvested in green hydrogen and ammonia ships and applications, and new types of vessels that carry the fuels of the future.”
While the market and shareholders of the respective companies were absorbing the situation, John Fredriksen moved once again, building a 16.5% stake through his private company Famatown Finance Limited in the US-based large tanker operator International Seaways, which responded by a limited duration stockholders rights plan.
The aim of the plan, noted International Seaways in a statement, was to “…reduce the likelihood that any person or group gains control of the company through open market accumulation, or other tactics potentially disadvantaging the interests of all stockholders, without paying all stockholders an appropriate control premium or providing the company’s board of directors sufficient time to make informed decisions in the best interest of all stockholders.”
The rights plan is due to expire in May 2023, although the board of International Seaways reserved the right to cancel the plan before then. In a letter from Seatankers Group, the management company of Famatown, the acquisitors said: “Part of the Seatankers Group’s DNA is to think and act like an investor, with a focus on value maximisation for the shareholders at all times.” The aim was to build a stake in the crude oil and product tanker sectors ahead of a market recovery, and the letter noted that International Seaways tactic of resorting to a “poison pill” was disappointing.
“The aim was to build a stake in the crude oil and product tanker sectors ahead of a market recovery”
Meanwhile, Euronav engaged a third-party, Institutional Shareholders Services, Inc. (ISS) to examine the combination transaction and the objections raised by CMB. In ISS’ opinion, the objections are not warranted. “We are pleased with this support from ISS,” said Euronav’s supervisory board in response to the ISS Report.
In response, the Saverys have steadily upped their stake in Euronav to 18.5%, inching closer to the 25% mark — a figure that would allow them to block the proposed merger with Frontline. CMB proposed three current and former CMB directors to be added to the board of Euronav – Ludovic Saverys; Patrick De Brabandere; and Bjarte Boe – but this was rejected.
The prize is a merger (plus potentially the International Seaways fleet) that would create the largest operator of Suezmax and VLCCs in the traditional large tanker company mould and the economies of scale that entails. Alternatively, investors might choose to buy into the decarbonisation defence of the “industrial cleantech powerhouse” proposed by the Saverys. The outcome will point to the future direction of tanker corporations.
© 2023 Riviera Maritime Media Ltd.