International Seaways and Diamond S in $2 Billion Tanker Mega-Merger
In a mega-merger, two US-listed tanker operators have agreed to combine to create one of the world’s largest energy transportation services for crude oil and petroleum products. A year in the making, Diamond S Shipping has agreed to merge into International Seaways. After the merger, INSW will continue to trade on the NYSE with its shareholders representing approximately 56 percent of the company and Diamond S shareholders receiving 44 percent of the new company.
The merger will create the second-largest US-listed tanker company with a vessel count of approximately 100 ships and the third-largest by deadweight with a total of 11.31 million dwt. On a pro forma basis, shipping revenues will be over $1 billion, with the combined company having over 2,200 employees and an enterprise value of approximately $2 billion.
According to management, the merger will position the company to benefit significantly as market conditions improve. Craig Stevenson Jr., currently president and CEO of Diamond S, said “As a long-time proponent of industry consolidation, I believe this transaction gives the combined company the scale and diversity necessary to hold the status as a leader in the tanker markets for years to come.” Stevenson will join the board of the combined company and continue as a special advisor for six months after the closing to ensure a smooth transition.
The merger of Diamond S with INSW management said unites two companies with long-term customer relationships, similar cultures, and complementary positions in key tanker sectors. The merger will enhance INSW’s capabilities in both the crude and product markets and create “power alleys” for INSW in the large crude -VLCC and Suezmax– and LR1/Panamax and MR markets.
“We are excited to enter into this transformational transaction and create an industry bellwether,” said Lois Zabrocky, INSW’s President and CEO. “By bringing together two leading US-based diversified tanker owners, we expect to deliver a number of compelling strategic and financial benefits to the stakeholders and customers of both companies. Specifically, with our enhanced scale and capabilities combined with a best-in-class ESG track record, we are ideally positioned to meet the evolving needs of leading energy companies and capitalize on favorable long-term industry fundamentals.”
The companies expect to be able to realize estimated annual cost savings of over $23 million and revenue synergies of $9 million by 2022 from the merger. The merger is also expected to be accretive to shareholders.
As part of the merger, the company will assume the net debt of Diamond S, which stands at approximately $565 million. They expect to have a combined pro forma net leverage ratio of 42 percent, which would be one of the lowest in the tanker sector and across global shipping. INSW and Diamond S also would have had robust liquidity on a pro forma combined basis, with over $300 million in cash on December 31, 2020.
Douglas Wheat, Lois Zabrocky, and Jeffrey Pribor will continue to serve in their current management position after the merger. A new board of directors will have three representatives from Diamond S and seven from International Seaway.
The merger, which is expected to close in the third quarter of 2021, is subject to the approval of the shareholders of INSW and Diamond S, regulatory approvals, and other customary closing conditions.