Battle of the Titans
Before Onassis and Niarchos there was the battle of The Titans, Titanomachy, Zeus and his siblings against their father Cronus. This battle, as legend has it, lasted ten years and ended with the Universe being partitioned, Zeus taking the Sky, Poseidon the Sea and Hades the Underworld.
Our current Battle of Titans is approaching one year, but to many it may feel like a decade dating back to antiquity. Fredriksen, the battle/merger hardened Viking as the press says against the Saverys family, one of the oldest shipping families in Belgium, their entity CMB (Compagnie Maritime Belge) dating to the 1800s. The ‘logical’ deal-man versus the legacy old-guard.
On April 7, 2022 Euronav and Frontline issued a press release announcing the planned merger with the now elusive phrasing:
“term sheet that has been unanimously approved by their Board of Directors and Supervisory Board, respectively, on a potential stock-for-stock combination between the two companies”
After the announcement, the Saverys family began increasing their stake in the company and proposing an alternate path to the merger. Eventually things started to get a little awkward as contested mergers do, and the dreaded ‘break-up’ and reconciliation of quarrelling spouses began.
During what I will call the “wind blown” phase in April 2022, CMB began lobbying the Board, increasing their stock position, and agitating for a profound shift in the strategy. The strategy announced was a futuristic tech hub to create new engine designs using alternative fuel technologies that also would own a few (or hundreds) of vessels.
The Euronav CEO, Hugo De Stoop, stuck in the middle of these quarreling lovers, while trying to navigate a complex scenario, said:
“there is a real toxicity in mixing the two technologies” and “the board did not find the project appropriate”
By May 19, Euronav said they had a “clear signal” from shareholders in support.
Fast forward through the ups and downs of the deal, Fredriksen ultimately announces the merger is off and a telling thing happened. FRO shares sky-rocketed and EURN shares plummeted. One of the easiest trades on record for some industry experts.
With the proverbial Northman inside the city walls and winning arbitration hearings the Saverys family’s leverage continues to be diminished. De Stoop remains the voice of reason (or the voice of staying CEO) against the Saverys optimistic efforts to retain control of the company, recently stating that he believes in Fredriksen’s pure-play strategy and that CMB’s efforts to replace the Board were “brutal”.
The tanker equity market would be well served by a larger market capitalization company with the scale to rival comparable industries. With the one year time charter market near $50K/day for eco-VLCCs, Suezmaxes and Aframaxes, the merged entity would be a cash flow behemoth. In an industry which always highlights the need for consolidation, this episode has shown how ‘it is easier said than done’ given the entrenched legacies of the market participants.
It is past time for the Saverys family to let the merger go through and use their recent winnings to build the maritime technologies of the future, just not at Euronav.
The market has spoken.
What will be next for Mr. Fredriksen, navigating the poison pill at INSW? With the best earnings in 14 years announced today, he will certainly have a war chest.
FRO 2023 potential shopping list:
INSW ($2.39Bn)
DHT ($1.87Bn)
TNK ($1.49Bn)
NAT ($0.8Bn)