Athens: Fredriksen-led Frontline and its affiliate Frontline 2012 have agreed to merge to create one of the biggest tanker operating companies in the world.
Frontline will survive the merger, with Frontline 2012 becoming the company’s wholly owned subsidiary.
To proceed, the merger requires that over 75% of voting Frontline 2012 shareholders and over 50% of voting Frontline shareholders vote in favour of the consolidation, as well as obtaining the requisite regulatory and customary closing approvals.
Voting will be conducted at special general meetings in the fourth quarter this year, after which the merger is expected to close as soon as possible.
Hemen Holding Limited, a company indirectly controlled by trusts on behalf of John Fredriksen’s family, will vote in favour of the merger. Heman owns around 13% of the ordinary shares in Frontline, 59% of the shares in Frontline 2012 and Ship Finance International Limited, plus a 28% stake in Frontline.
Once the merger is completed, Hemen will own approximately 52% of Frontline; Ship Finance will own a 7% stake.
“By merging Frontline and Frontline 2012 we will regain Frontline’s position as a leading tanker company. The combined company will have a large fleet and a strong balance sheet which puts us in a position to gain further market share through acquisitions and consolidation opportunities,” said John Fredriksen, chairman of Frontline Ltd and of Frontline 2012.
The combined company will have a total fleet of around 90 tankers, including around 20 chartered-in or vessels or those under commercial management. The fleet will comprise around 25 VLCCs, 17 suezmaxs, 16 MR product tankers and ten LR2 aframaxes.
After the merger, Frontline’s newbuilding programme will consist of around 22 vessels, all scheduled to be delivered between this year and 2017.
“With the current strong tanker market and attractive cash break even rates, we believe the combined company will generate significant free cash. The intention is to pay out excess cash as dividends at the Board’s discretion. I am very pleased with this merger and I am determined to develop and grow the company further,” Fredriksen said.
When the merger is completed, shareholders will receive 2.55 shares in Frontline for every one share they hold in they hold in Frontline 2012 as the merger consideration. Some 584m Frontline shares are expected to be issued to Frontline 2012 shareholders.
How quickly things change; six – eight months ago, all eyes were on Frontline’s debt servicing- the concerns that payments would not be met.