trending Market Intelligence /marketintelligence/en/news-insights/trending/dboB9SiLo0SYHMjFiJhEMQ2 content esgSubNav
In This List

Frontline to acquire 10 Suezmax tankers from Trafigura in cash-and-stock deal

Podcast

Next in Tech | Episode 49: Carbon reduction in cloud

Blog

Using ESG Analysis to Support a Sustainable Future

Research

US utility commissioners: Who they are and how they impact regulation

Blog

Q&A: Datacenters: Energy Hogs or Sustainability Helpers?


Frontline to acquire 10 Suezmax tankers from Trafigura in cash-and-stock deal

Frontline Ltd. struck a deal with commodities trader Trafigura Pte. Ltd.'s subsidiary Trafigura Maritime Logistics Pte. Ltd. to acquire 10 Suezmax tankers in exchange for a stake in Frontline and cash consideration.

The acquired Korean tankers were built in 2019 and fitted with exhaust gas cleaning systems, according to an Aug. 23 news release from the Bermuda-based oil shipping company. Under the sale and purchase agreement, Frontline will acquire a Trafigura Maritime special purpose vehicle that owns the vessels.

Frontline agreed to time charter the vessels from Trafigura until deal closing at a daily rate of about $23,000. Of the 10 vessels, Frontline will charter five back to Trafigura on three-year time charters at a daily base rate of $28,400 with a 50% profit share above the base rate.

As a result of the acquisition, Frontline's fleet will total 75 vessels with an aggregate carrying capacity of 14.2 million deadweight tons and an average age of 3.7 years.

The transaction consideration consists of 16,035,856 ordinary shares of Frontline at $8 per share issued to Trafigura, and cash ranging from $538 million to $547 million payable upon deal closing. As a result, Trafigura will own around 8.48% of Frontline's ordinary shares, while Frontline will have a total of 189,153,166 outstanding shares par value $1 each.

Frontline is also in talks with lending banks that expressed interest in providing financing for the deal. An affiliate of Hemen Holding Ltd., Frontline's largest shareholder, offered a $547 million commitment through a three-year facility at deal closing.

Frontline also has two separate options to acquire four more China-built tankers by buying a second Trafigura Maritime special purpose vehicle, with each option allowing for the purchase of two tankers. The options expire on Sept. 12 and Sept. 24, and the second option will expire if the first option is not exercised. The transaction structure for the four additional vessels will be similar to that of the 10 acquired vessels.

Frontline Management AS CEO Robert Macleod said the structure of the transaction immediately impacts their earnings at a time when freight rates are expected to rise. The company also expects the deal to boost dividend capacity, Macleod said.

The deal is expected to close as early as Nov. 15, or March 15, 2020, at the latest.

DNB Markets acted as mandated adviser between the parties in the transaction.