Euronav Loses First Arbitration as Frontline and CMB Reject Compromise
The struggle over the future of tanker operator Euronav continues to play out between the boardroom and the courts. The company continues to find itself caught between its two large shareholders, CMB and Frontline, each of which controls approximately a quarter of the shares outstanding and shows no signs of a compromise.
Frontline has won the first step in its fight against Euronav after announcing early in January 2023 that it had decided not to proceed with the share exchange as a first step toward combining the two companies. At the time, Frontline said it had determined that the combination would not realize the anticipated outcome due to the ongoing opposition of CMB and the Saverys family, which had said it would block completing the merger of the two companies.
Euronav sought an emergency arbitration to prevent Frontline from walking away from the agreements. Today, February 7, the companies reported that the judge rejected the petition for an interim and provisional measure to stop Frontline from abandoning the deal. Frontline said the claims were fully dismissed noting that the arbitrator ordered Euronav to pay its legal costs.
“This decision strengthens Frontline’s position that its decision to terminate the combination agreement was entirely lawful,” the tanker company controlled by John Fredriksen said in its announcement. Frontline however is not yet entirely free from its obligations as Euronav filed for a second phase of the arbitration on January 28 that will consider the full merits of the claim. Euronav contends the emergency arbitration was dismissed because of a lack of urgency to its claim with the arbitrator preferring to let it proceed to a hearing on the full combination agreement.
Euronav also reports that the warring shareholders refused its proposal for shared oversight of the company. Euronav had proposed reconstituting the supervisory board with two representatives, Marc Saverys and Patrick De Brabandere, from CMB and two from Fredriksen’s organization, while also maintaining continuity. They said that CMB had informed them it was “not inclined to agree.”
After the announcement that the combination would not proceed, CMB renewed its pressure on the supervisory board. Under Belgian security law, they requested a Special General Meeting of the shareholders proposing to replace the entire supervisory board with Marc Saverys and a slate of directors selected by the family.
Euronav has set March 23 as the date for the shareholder meeting to consider the proposal from CMB. With Frontline and CMB currently each holding nearly equal positions in the stock, the institutional shareholders will decide on the issues including the current board versus the Saverys. The proposal is part of the family’s belief that Euronav should be moving in new directions to address the challenges to decarbonize the operations and the longer-term prospects for the oil markets.
Near term, however, the markets are strong with Euronav predicting during last week’s financial report “positive conditions within the tanker market for multiple quarters ahead.” They pointed at their efforts in positioning in the market including fleet renewal saying with demand driving freight rates to a 30-month high they believed they were well positioned to participate in the continuing market upcycle.