The takeover is being made in two stages with Scorpio acquiring four LR1 tankers from Navig8 for $42.4m in cash, net of assumed debt, prior to closing. And then Scorpio issuing 55m new shares to the shareholders of Navig8, taking over the company’s 23 remaining product tankers on closing.
Following completion of the merger Navig8 shareholders will have a 24% stake in the enlarged Scorpio Tankers. The deal gives Navig8 an equity value of $228.8m based on Scorpio’s closing share price with an enterprise value of $1.1bn including assumed debt.
A majority of Navig8 shareholders have agreed to the merger and Scorpio said that it is therefore expected the merger will be approved.
Scorpio Tankers is also undertaking a $200m stock issue to fund the acquisition of the LR1 tankers, pay for other merger costs and to strengthen is balance sheet.
Explaining the rationale for the acquisition the company said: “Scorpio will be the largest owner of product tankers listed on a US securities exchange, with a fully delivered fleet of 105 vessels.”
Scorpio will have a fleet of eight LR2 tankers, 12 LR1 tankers, 41 MR tankers, and 14 handymax tankers following the merger.
Scorpio said that substantial economies of scale would give it a, “Significant presence across adjacent product tanker segments will provide for enhanced customer relationships and increased vessel utilisation.”
The acquisition was greeted positively by Deutsche Bank. “Net/net we believe today’s announcement has the potential to be a significant positive for STNG (Scorpio Tankers) shareholders over the mid-to-long-term,” it said in a note.
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