Frontline-Euronav Merger in Jeopardy as Saverys Increase Position
The nearly year-long battle for control of Belgian-headquartered crude oil tanker company Euronav is again in question. The Saverys family, which is the largest shareholder of Euronav and has opposed John Fredriksen’s proposal to merge Euronav and Frontline, has further increased its shareholdings officially putting itself in a position to prevent a full combination of the two companies. The latest move comes just a week before shareholders of Frontline were due to approve the first step in the complicated process to combine the companies.
In a new filing with the U.S. Securities Exchange Commission, Compagnie Maritime Belge, also controlled by the Saverys family, reports that it now holds over 50.4 million shares of Euronav, giving it effectively 25 percent of the shares outstanding. The holding was increased by over two million shares versus the previous report on December 7. Analysts are pointing out that since the battle for control of Euronav began, the Saverys family has spent over $600 million to increase its holdings in the company. In February 2022, they owned 13.9 million shares, or approximately seven percent of Euronav.
Under the securities laws governing Euronav, at least three-quarters of shareholders would have to agree to a full merger or combination of the companies into a single entity. Yet analysts point out that while the family could block the full merger, they can not prevent an initial consolidation whereby Euronav could become a subsidiary of Frontline and be controlled by Frederiksen’s management team.
Analysts believe Frontline initially wanted to acquire Euronav outright but due to the opposition moved to a more complex transaction. They have proposed a voluntary exchange of shares contingent on only reaching 50 percent of Euronav. They would then be able to make Euronav a publicly-traded subsidiary of Frontline and Frederiksen had said they could then seek to force out the remaining shareholders to complete the merger.
The Saverys family has opposed the combination saying that both companies need to evolve to meet the new challenges in the shipping market and the anticipated changes longer-term in the oil market. At the same time, they point to the need to implement a decarbonization strategy for the fleet while saying they do not believe a combination with Frontline would create the cost savings and market strength that Frederiksen has used to justify the merger. Further, the family has said the resulting structure of a publicly-traded subsidiary would be cumbersome and difficult to administer further reducing the value of the combination.
The Frederiksen team speaking today to the Norwegian news outlet Finansavisen said that “A prolonged shareholder dispute is not value-creating for any shareholders.” They currently hold 17.78 percent of Euronav mostly in a Frederiksen-controlled investment company and a small portion owned directly by Frontline. During the summer, Frontline exchanged some shares with independent investors of Euronav.
Frontline has scheduled a shareholder meeting and vote on December 20 for the first step in the combination. Shareholders were being asked to approve a move for the company from Bermuda to Cyprus. Once that was completed, Frontline would make its filing with the SEC and begin the proposed voluntary offer to exchange shares with Euronav’s investors.
Fredriksen made the first share purchases in October 2021 prompting speculation over his intent. Analysts point out that the crude oil market and its transport changed dramatically since then leading them to believe that there is frustration over the time needed to complete this transaction. If they can complete it, the combined company would be the largest fleet of Suezmax and VLXCC crude oil tankers.