BW Group’s product tanker arm Hafnia revealed that it has proposed a combination with New York-listed product tanker owner Ardmore Shipping Corp in an all-stock transaction.
Hafnia said it sent a letter to the chairman of the board of directors of Ardmore outlining its proposal and invited discussion regarding a transaction, however claims that less than two weeks later the proposal was outright rejected. Hafnia said that despite Ardmore conducting a thorough review, there has been no follow-up discussions or negotiations between Ardmore and Hafnia.
“We are disappointed by Ardmore’s response and continue to believe that our proposal is in the best interests of Ardmore shareholders. A centerpiece of our business plan is our focus on creating shareholder value. We believe that large and well-capitalized 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. By optimizing for these benefits, we are confident that the combined company would provide significantly higher value for Ardmore and Hafnia shareholders in both the short- and the long-term,” Hafnia said in a statement.
In response, Ardmore issued a statement calling the unsolicited approach highly opportunistic, said it substantially undervalued Ardmore and its future prospects, and did not constitute a basis for engaging in discussions with Hafnia.
Ardmore said the proposal implied an offer price to Ardmore shareholders of $3.87 per share, representing a discount of around 18% to the Ardmore share price on June 19, 2020. Ardmore’s shares have been extremely volatile through 2020, starting the year around $9 and dropping as low as $4.
“What I found most interesting is that the deal multiple was significantly underneath Ardmore’s current share price when using shares as currency, which reflects the fact that both companies trade at steep NAV discounts. Hafnia positioned their offer with less NAV percentage for Ardmore, hoping to get a great accretive deal. Unsurprisingly, Ardmore has turned this down and is looking for more,” J Mintzmyer from US-based Value Investor’s Edge told Splash today.
“This feels very similar to the takeover attempt of Dorian LPG in mid-2018, led by BW LPG. Unsurprisingly, BW Group is involved with both of these transactions. In the Dorian deal, BW refused to budge and both companies went their separate ways,” Mintzmyer said.
A combination of the two companies would see an enlarged fleet of 210 vessels and a combined NAV of approximately $1.5bn.
“While no discussions between Hafnia and Ardmore are ongoing, this information is shared for market transparency and Hafnia remains open to consolidation discussions in the future,” BW Group stated.