The tanker world: Deja Vu all over again?

Many many moons ago, I posted on tanker company Frontline (FRO). Someone else on the METAR board enjoyed that post, as it got nominated and earned me my first ever POTD (Post Of The Day) - remember those awards/events? Anyway, back then, Frontline was this behemoth tanker entity - the largest independent oil tanker company in the world.

The post would have been late 2008-early 2009. In the intervening years, Frontline struggled financially, shrunk in fleet size, and nearly went bankrupt. While Frontline worked to right its ship (pun intended), one of its smaller rivals, Belgian tanker company, Euronav (EURN) was completing mergers and growing its tanker fleet. In the first half of 2022, though the smaller company, Frontline made an offer to acquire the larger rival, Euronav.

Let me condense and summarize. One major Euronav shareholder, the Saverys family, were opposed to the merger. Both the Saverys family and Frontline and its backer, Johan Fredriksen, kept increasing their respective stakes in Euronav. In Jan 2023, Fredriksen & Frontline, announce - merger is off. Saverys family protest, and file a lawsuit, and subsequently, lose the lawsuit. More recently, the two sides have come to an agreement.

The major points

  1. Fredriksen & Frontline will sell their Euronav shares to the Saverys family
  2. Frontline will acquire 24 of Euronav’s 41 VLCC for $2.35B
  3. Saverys family can acquire minority shareholder stake and take Euronav private

Still has to be approved by Euronav shareholders and clear anti-trust concerns. Assume it clears those two hurdles, Frontline (FRO) will likely regain its long lost title of “largest independent tanker company” again.

Frontline provided additional details on 10/09/23

Three items got my attention

  1. Financing (slide 4) - On the surface, it looks like 11% equity. But, I suspect Fredriksen could convert some of his financing into actual FRO equity down-the-road.
  2. Low VLCC orderbook (slide 7)
  3. EEXI/CII potential impact (slide 9)

(Restarted FRO stake in 2023, but have trimmed the more expensive shares)