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Frontline buying 24 VLCCs from Euronav for $2.35 billion

Photo: Euronav Tanker Ann Euronav from above
Euronav VLCC Anne on sea trials
John Fredriksen’s Frontline is set to become the largest public-listed pure play tanker owner with the acquisition of 24 VLCCs from Euronav for $2.35 billion.

The deal brings to an end ongoing battle for control of Euronav between Fredriksen and the Savery’s family after an attempted merger last year with Frontline collapsed. Frontline and Fredriksen’s Famatown will also be selling its 26.12% stake in Euronav to the Savery’s owned CMB for $18.43 per share.

The deal sees NYSE and OSE-listed Frontline agreeing to buy 24 VLCCs with an average age of 5.3 years from Euronav. Some 22 of the 24 VLCCs were built at Korean shipyards and nine are fitted with scrubbers.

Frontline’s fleet will increase to 89 from 65 vessels which it said would make it the largest pure play tanker company in the public domain in terms of overall deadweight tonnage.

Fredriksen commented: “I firmly believe in building best in class companies through consolidation. This transaction will solidify Frontline’s position as the leading publicly listed tanker company, and significantly expand our exposure towards modern efficient VLCCs at an opportune time in the cycle.”

Frontline highlighted the low level of the VLCC newbuilding orderbook – just 2% of the current fleet and the long lead time that owners looking to order new tonnage would face at shipyards already full with orders for other types of large vessels.

Lars H. Barstad, Chief Executive Officer of Frontline Management, added: "This transaction reflects our platform’s ability to act decisively on large scale fleet transactions with the support of our largest shareholder and key relationship banks. The structure of the transaction will significantly increase Frontline’s operating leverage as we enter a period of historical low deliveries of new capacity in the tanker market.”

The acquisition of the 24 VLCCs will be funded through a mix of the $252 million from the sale of shares in Euronav and other sources. Other funding comes from a drawdown under the existing $275 million senior unsecured revolving credit facility, a new five-year senior secured term loan facility in an amount of $1.41 billion from a consortium banks, and Fredriksen’s Hemen Holdings has offered Frontline a subordinated unsecured shareholder loan of up to $540 million.

Euronav has dropped legal action taken against Frontline after it pulled out of the planned merger in January this year.