U.S.-based gas carrier owner and operator Dorian LPG has rejected a takeover bid from Singapore-based counterpart BW LPG.
The stock-for-stock transaction would have created an owner and operator of 73 vessels, including 70 VLGCs, and 3 LGCs, with an aggregate fleet capacity of 6 million cubic meters.
After a consultation with financial and legal advisers, Dorian LPG’s Board of Directors decided that the USD 1.1 bn offer ‘undervalues Dorian on both an absolute- and relative-value basis’.
Dorian LPG added that the BW LPG’s proposal doesn’t recognize the value of Dorian’s younger, more fuel-efficient ships, the company’s superior commercial performance and forces shareholders to accept equity in a more highly-leveraged combined company.
Namely, Dorian’s fleet includes 19 ECO-ships, comprising 86% of the company’s total fleet, while only about 40% of BW LPG’s 51-ship fleet consists of ECO-ships. What is more, BW LPG’s owned and operated fleet is considerably older than Dorian’s, the LPG owner explained.
As such, considerable investment would be required to renew BW LPG’s fleet and make it compliant with the new regulations, which Dorian believes should not be subsidized by its shareholders.
Furthermore, the arguments against the bid claim that the proposed dual listing of the combined company was not going to benefit Dorian shareholders.
“The board believes that Dorian’s current strategy is working and that Dorian’s younger, more fuel-efficient fleet with lower leverage protects the company at the bottom of the industry cycle and positions it best for long-term growth and success,” the company explained.
“A combination of BW LPG and Dorian would improve financial flexibility for BW LPG, but would have the opposite effect for Dorian,” John Hadjipateras, Chairman, President and Chief Executive Officer of Dorian, said in a letter to Andreas Sohmen-Pao, Chairman of the Board of Directors of BW LPG.
Hadjipateras concluded that Dorian would be willing to discuss acquiring or consolidating some or all of BW LPG’s 17 ECO-ships into its commercial platform.
“We believe that such a proposal would allow for a more transparent relative valuation and could be concluded relatively expeditiously. If your board is interested in this type of consolidation, we would be prepared to enter into discussions about its potential merits,” the letter reads.
Dorian LPG booked a net loss of USD 3.5 million for the three months ended March 31, 2018, and a net loss of USD 20.4 million for the year ended March 31, 2018.