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Frontline and Euronav to Join Hands in $4.2B Transaction

In a major development, tanker companies Frontline Ltd. (FRO) and Euronav NV (EURN) have announced a merger that will create a global leader in the oil tanker sector.

The Oslo-headquartered Frontline has a fleet of 19 Very Large Crude Carriers (VLCCs), 27 Suezmaxes, and 18 Long-Range 2 (LR2) tankers. Six more VLCCs are expected to be delivered in 2022. Meanwhile, Antwerp-headquartered Euronav’s fleet includes 2 V-Plus vessels, 41 VLCCs, 27 Suezmaxes, and 2 FSO vessels. Three more VLCCs are under construction.

Deal Terms

The terms include a potential stock-for-stock combination at an exchange ratio of 1.45 Frontline shares for each Euronav share. Consequently, Euronav investors will own 59% of the merger, with the rest owned by Frontline investors. Additionally, before the closing of the deal, Euronav will distribute total dividends of up to $0.12 per share.

Subject to closing, the combined entity will continue under the name “Frontline”. The transaction will create a global oil tanker operator with a strong balance sheet, combined expertise in the shipping industry, and will provide benefits including, improved utilization and cost synergies, synergies associated with SG&A, and other savings.

The merger remains contingent on agreement on a transaction structure, due diligence, and other conditions, approvals, and requirements being fulfilled.

Management Weighs In

The CEO of Frontline, Lard H. Barstad, commented, cFrontline believes this transaction would form a powerful combination at an exciting point in the cycle. The combination would create a strong platform to further enhance shareholder value for our investors.”

Euronav Chairman, Carl Steen, said, “A transaction between Frontline and Euronav is expected to deliver real value for both sets of shareholders. The financial strength of the combined group, with a strong leadership team, would make the combined entity well placed to maximize value throughout the tanker market cycle.”

Hedge Fund Activity

According to TipRanks data, Wall Street’s top hedge funds decreased holdings in Euronav by 299,800 shares in the last quarter, indicating a negative hedge fund confidence signal in the stock based on the activities of three hedge funds.

Closing Note

Amid the challenges faced by the tanker industry due to COVID-19, supply-chain disruptions, and fuel price gyrations, the combined entity with a larger fleet and resources will help deliver higher value to both investors as well as customers.

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