John Fredriksen’s Frontline is proposing to take over US-listed tanker owner DHT Holdings in what DHT says is a non-binding, highly conditional proposal to acquire all of the company’s outstanding shares in a stock-for-stock transaction.
Frontline has proposed to issue 0.725 of a Frontline share for each DHT share, representing a price of $5.09 per DHT share based on the closing price of Frontline shares on Friday.
The offer represents a 19% premium based on Friday’s closing price for DHT shares at $4.27.
Frontline revealed in its proposal that is has already acquired over 15 million shares in DHT, giving it a 16% stake in which to launch its takeover from.
DHT said it will evaluate the proposal from Frontline and respond accordingly in due course.
Frontline has been on the hunt for acquisitions to add to its fleet since December when it raised $100m via a new share offering. Subsequent market speculation followed that Peter Georgiopolous’s Gener8 would be a likely takeover target.
In response to the takeover big, the board of DHT has unanimously adopted a one-year shareholder rights plan and declared a dividend of one preferred share purchase right for each share of DHT common stock outstanding at the close of business on February 9. The plan is intended to give the company time to properly consider the proposal from Frontline as well as to prevent a hostile takeover.
The potential deal has not been met with universal acclaim however. J Mintzmyer, a shipping stock market analyst based in New York, told Splash, “The totally lowball offer by Frontline is insulting to DHT shareholders.” Mintzmyer reckoned an offer closer to $6.50 a share would make more sense. He also maintained that Gener8 Maritime would be a better takeover target in the current pricing environment.
DHT has a fleet of 19 VLCCs and two aframax tankers, and a takeover would see the Frontline fleet grow to around 80 vessels.
“A combination of Frontline and DHT is expected to create the largest public tanker company by fleet size, market cap, and trading liquidity,” Frontline said in a statement to the Oslo Bors today.
“Assuming significant cost synergies are achieved, as well as superior access to debt and equity capital markets, Frontline believes a combined entity would generate significant free cash flow and maximize value for both companies’ shareholders,” the tanker owner added.