Athens - As tanker freight rates are still reeling under the pressure of oversupply of tonnage, more and more tanker owners are entering consolidation mode, in a bid to improve economies of scale and avoid financial problems.
In its latest weekly report, shipbroker Gibson said that “just before Christmas last year, the tanker market was greeted with the announcement of the proposed merger between two NYSE quoted tanker companies, Euronav and Gener8. At the time of writing this merger has still to be approved but, if the green light is given, the joint company will own 40 VLCCs and 28 Suezmaxes (incl. four newbuildings). Part of the deal includes the sale of six Gener8 VLCCs to International Seaways, another NYSE company which will raise their VLCC profile to 16 vessels. In a separate deal, concluded in March, DHT Holdings announced the acquisition of all 11 VLCCs from the BW Group (incl. 2 newbuildings). The BW Group promptly then placed an order in May for four VLCC newbuildings from Samsung HI for 2019 delivery at an attractive price. These were the only major “consolidation” deals concluded in 2017 in the large tanker sector. DHT had rebuffed several takeover proposals by Frontline earlier in the year”.
The London-based shipbroker added that “the beauty of the agreed deals is that both parties would grow their fleets without adding to the existing orderbook and as a result of clever acquisitions, bring down the age profile of their respective fleets. Euronav has a good track record of smart acquisitions without adding to the orderbook. In March 2015 the company purchased 4 brand new VLCCs from Metrostar. At the same time selling off the older units at good prices to keep the fleet modern. DHT has also been very active in this area too, selling off 5 units in November (all over 17 years of age) to reduce bank debt. Based on the VLCC fleet today (excluding VLCCs on order) and assuming the Euronav/Gener8 deal is ratified, Euronav will own 5.5% of the fleet, while DHT Holdings will own 3.2%. With the recent delivery of two units, Frontline now owns 3.0%, while International Seaways ownership could rise to 2.2%. Of course, consolidation has several strategic benefits for listed companies, as size does matter, making shares more liquid and more attractive to investors. Euronav’s acquisition of the Gener8 fleet will of course swell the Tankers International Pool at the expense of the VL8 pool, providing a stronger platform to counter the charterers”.