DHT: Deal with BW Not a Defensive Strategy

Image Courtesy: DHT

Marshall Islands-incorporated tanker owner and operator DHT Holdings said that its move to acquire very large crude carriers (VLCC) from LPG owner BW Group has nothing to do with Frontline’s failed attempts to acquire DHT.

As disclosed, the fleet acquisition move is not targeted at “depriving Frontline of the ability to press its pending offer to acquire DHT and all but ensure control is transferred to BW”.

“There is no change in control, there is no creation of a clear path to ownership for BW and there is nothing in the vessel acquisition agreement or the associated investor rights agreement (“IRA”) that precludes Frontline from mounting a proxy contest in the future if it so desires… It is not a takeover defense and was not initiated as part of any broader defensive strategy,” DHT added.

The purchase of 11 oil tankers is described by DHT as an effort to expand the size of the company and improve its performance and prospects.

“The mere fact that some of the 2 currency being used to acquire those vessels is stock does not entitle Frontline to block this beneficial transaction.”

The statement came on the back of Frontline’s recent attempt to block the transaction in New York court, which was rejected.

In March 2016, John Fredriksen’s tanker company Frontline contacted DHT and presented a proposal to combine the two business in consideration to DHT stockholders of 0.675 Frontline shares for each DHT share. DHT’s board rejected the offer.

Two more proposals ensued in January and February 2017 that were both shot down by DHT as unsatisfactory.

Over the following period the duo engaged in intensive discussions but could not reach a common ground on the terms of the acquisition offer.

Separately, in mid-2016, DHT decided to expand its business and add more ships to its fleet. It began talks with BW, and on March 23, 2017, the two companies executed the vessel acquisition deal for nine VLCCs and contracts for two new VLCCs to be delivered in 2018, in exchange for a combination of cash consideration in the amount of USD 177.3 million and aggregate equity consideration of 32,024,395 shares of DHT’s common stock and 15,700 shares of a new series of DHT’s preferred stock, which would grant BW a 33.5% interest in DHT.

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