The latest round of corporate consolidation in the product tanker sector is a natural product of the shipping cycle. If and when the tanker market peaks again, these merged units will most likely splinter into IPO companies.
As the cold winds of economic misfortune blow across the tanker landscape, it is natural for companies to huddle together and reach for the meagre comfort of economies of scale. The latest is the merger of Hafnia Tankers and BW Tankers, broadcast by Hafnia chief executive Mikael Skov.
“Hafnia is exploring the possibility of consolidation with BW Tankers, a company owned by BW Group, one of our shareholders,” he explained to investors.
At the time, BW chief executive Carsten Mortensen said “We see a good cultural fit between the organisations,” which was somewhat ironic as Mikael Skov has since left Hafnia Tankers, and BW Tankers’ chief executive Tina Revsbech left her post, too.
The merger and subsequent loss of key personnel is a normal feature of corporate mergers. The first tanker merger I recall covering was John Fredriksen’s takeover of publicly quoted London & Overseas Freighters (aka LOFs) sometime in the 1990s. Out of the door went founding family member and chief executive Miles Kulukundis, and in came the Fredriksen team.
Of course, John Fredriksen is the undisputed king of the shipping deal. Which brings us the other feature of tanker mergers and consolidations – the new structure rarely remains the same. The main reason is that the conditions that produced the merger become redundant once a favourable market returns. While it is a bit too journalistic to say that “investors are clamouring to invest in tanker companies,” when the tanker market is hot, it becomes attractive to Wall Street.
In the current form, Hafnia's tanker pool controls about 55 LR1s and BW Tankers owns 19 LR1s. These make up over 20% of all LR1s on the water, according to VesselsValue.
The merged fleet is young: even if the upturn in the market to IPO-possible levels takes another four or five years, the Hafnia/BW Tanker combined fleet would still have an average age of less than 10 years old, an attractive IPO prospect in the right market.
If you agree with my Comment, you may want to consider BW Tankers for the 2018 Tanker Shipping and Trade Awards.