Frontline launches takeover offer for Double Hull Tankers

Frontline, the crude oil tanker owner controlled by John Fredriksen, has launched a $475m takeover offer for Double Hull Tankers, one of its biggest listed rivals.

The move would create the world’s largest crude oil tanker operator by fleet size and market capitalisation, taking it well clear of similarly-sized Euronav, and is large by the standards of the fragmented bulk shipping market.

It represents the latest audacious trading move by Mr Fredriksen, who remains, at 72, the most influential figure in the world’s bulk shipping market.

Frontline already controls 16.4 per cent of DHT’s shares but said it was offering 0.725 of its own shares for every remaining DHT share, an offer that values its rival’s equity at $475m.

The deal suggests Mr Fredriksen is continuing to pursue his long-term strategy of being the biggest operator of the largest kinds of crude oil tankers, in the hope that this will allow him to influence the volatile market’s direction.

In December, Frontline raised $100m through an offering of new shares that the company made clear would be used to expand the company’s fleet.

Andreas Wikborg, an analyst at Oslo’s Arctic Securities, said Frontline’s move was clearly intended to put the money raised last year to use.

“He signalled, ‘We are looking aggressively at expanding our fleet’,” Mr Wikborg said of Mr Fredriksen.

DHT owns 19 Very Large Crude Carriers, the largest commonly-used type, and two Aframaxes, a medium-sized tanker. If the transaction goes through, they will join Frontline’s existing fleet of 21 VLCCs, 17 Suezmaxes, which carry about 1m barrels of oil each, and 20 smaller crude oil and oil product tankers.

DHT’s shares were up 6.4 per cent in morning trading in New York, at $4.55. Frontline’s shares were down 0.85 per cent, at $6.96.

Mr Fredriksen’s latest move follows five years when he has struggled to nurse his numerous tanker, dry bulk and oil drilling shipping ventures through some of the toughest market conditions in decades.

He launched a complex bailout in 2012 for Frontline, funded from his own resources, at a time when many other tanker operators were forced into bankruptcy protection. He has since undertaken a series of other deals involving Golden Ocean, his main dry bulk vehicle, and Knightsbridge, another tanker operator.

His oil drilling ship company, Seadrill, has suffered particularly intensively from the decline in deep-sea oil exploration following the decline in the oil price.

Tanker rates softened over the course of 2016, sending shares in many listed operators down. Vessel deliveries this year are expected further to soften rates. However, last week’s average spot rate for a VLCC, of $33,027 a day, is still comfortably above the $24,000 a day at which Mr Wikborg said DHT’s vessels broke even.

Mr Wikborg said Frontline’s offer initially seemed low but that, taking into account Frontline’s lower operating costs and greater financial strength, the deal made sense.