Ardmore rejects Hafnia merger proposal

On 19 June 2020, a few days after the strategic product tanker partnership between Diamond S Shipping and Norden to form DiaNor was announced, Hafnia made a proposal to combine with Ardmore Shipping Corp in an all-stock transaction.

On 6 July 2020, Ardmore Shipping’s board of directors firmly rebuffed Hafnia’s proposal of a merger. In a letter to shareholders it confirmed it received an unsolicited acquisition proposal from Hafnia Limited to acquire all of the outstanding shares of Ardmore in an all-stock transaction. Under the terms of Hafnia’s proposal, each Ardmore share would be exchanged for 2.4 shares of Hafnia common stock.

Ardmore Shipping took legal and financial advice and the board of directors, “determined that the proposal was highly opportunistic, substantially undervalued Ardmore and its future prospects, and did not constitute a basis for engaging in discussions with Hafnia.”

According to Hafnia, the share offer implied a discount of 18% on the then Ardmore Shipping share price and a 28% discount on the share price average for the previous 28 days.

In response, Hafnia issued a statement regretting Ardmore’s rejection, stating “We are disappointed by Ardmore’s response and continue to believe our proposal is in the best interests of Ardmore shareholders. A centrepiece of our business plan is our focus on creating shareholder value. We believe that large and well-capitalised shipping companies can be more cost-competitive in operations and financing, better equipped to make the necessary environmental investments to meet new regulations, and better able to provide public shareholders with scale and liquidity.”

These were the arguments put forward by Hafnia’s chief executive Mikael Skov, who expounded the virtues of further consolidation in the product tanker market during the Tanker Leaders’ Webinar. Scorpio Group president Robert Bugbee noted that as the product tanker fleet ages, the pre-15-year-old premium charter product tankers would agglomerate around a few well-financed companies, and the post-15-year-old fleet would no longer attract premium charter rates. This would create a form of consolidation in the product tanker market.