A potential US$2.3Bn merger is on the table for Hafnia Tankers and BW Tankers, according to Hafnia CEO Mikael Skov.
Mr Skov confirmed talks between the two businesses were ongoing in a second quarter interim earnings report.
“Hafnia is exploring the possibility of consolidation with BW Tankers, a company owned by BW Group, one of our shareholders,” Mr Skov’s satatement said.
BW Group upped its shareholdings in Hafnia in early July when it acquired BTS Tankers Partners LLC. With the acquisition, BW Group became the beneficial owner of 43.5% of the Hafnia Group.
BW chief executive Carsten Mortensen foreshadowed the merger, saying “We see a good cultural fit between the organisations, as well as the opportunity to further integrate the fleets and provide even better service to customers in the product tanker markets.”
VesselsValue tanker market analyst Court Smith told Tanker Shipping & Trade that the merger discussion appeared to be a well-timed market consolidation between two large clean tanker operators in a weak spot market freight environment.
“This merger would give the new entity a substantial chunk of the commercial control on the LR1 fleet,” Mr Smith said. “Hafnia’s Straits tanker pool currently controls about 55 LR1s and BW currently owns 19 LR1s. If these ships were all traded by one management team it would make up over 20% of all the LR1s on the water.”
Mr Smith said the hypothetical new company would be a “classic story of consolidating market share in a downturn, allowing the new business to thrive when the market turns”.
Both owners have very modern fleets with an average age of 5 to 6 years for vessels on the water, according to VesselsValue data.
In June, the acquisitive BW Group’s LPG shipping operations company, BW LPG moved to consolidate with Dorian LPG Ltd in an all-stock proposal. BW LPG also announced its intention to nominate independent, highly qualified individuals to stand for election to Dorian’s board of directors at Dorian’s 2018 annual meeting of shareholders. Dorian’s board unanimously rejected the offers.
The tanker market has undergone a spate of consolidation in recent years. Hafnia began separate merger talks with Diamond S Shipping in July 2017. Scorpio completed its merger with Navig8 Product Tankers in September 2017. And Euronav and Gener8 finalised a merger in June 2018.
Estimates show the combined worth of the merged Hafnia and BW fleets would be roughly US$2.3Bn.
Hafnia gave a book value of its fleet at just over US$1Bn in its earnings report. Hafnia Tankers owns and operates a fleet of 43 product tankers in the LR1, MR and SR segments and has four newbuildings set for delivery in 2019, and the company’s common shares are traded on the Norwegian OTC market. Hafnia said it generated an operating profit for the six months up to 30 June 2018 of US$2.6M and a net loss of US$12.0M, including a one-off expense of US$3.2M.
BW Tankers owns and operates a fleet of 55 product tankers in the LR2, LR1 and MR segments including newbuildings, and VesselsValue values the live fleet at nearly US$1.3Bn.