Saverys Call for End of Euronav-Frontline Merger and Strategy Talks

A day after confirming that it has accumulated enough shares to block a full merger of Euronav and Frontline, Alexander Saverys, CEO of CMB, issued a letter to the board of Euronav calling for the termination of the combination agreement and new discussions on the future strategy of the company. Saverys reiterated the family’s long-standing objections to the merger making it clear that they would not permit Frontline to fully consolidate Euronav under the current terms of the agreement.

“We stated on several occasions that we believe there is a better strategy for Euronav. We believe this strategy should be based on diversifying the Euronav fleet and playing a leading role in the decarbonization of the shipping industry,” Saverys write to the board. “Compared with a takeover by Frontline, we believe this strategy will create significantly more positive long-term value for all of Euronav’s stakeholders, not least its employees, and make the company ‘future-proof’.”

The family which historically has been the largest shareholder of Euronav confirmed that it now holds 25 percent of the voting stock and that it will not vote for the merger. Under the securities laws governing the transaction, a 75 percent shareholder approval would be required for the full merger.

Saverys reiterates their belief if the combination proceeds the result would be two separate competing companies (Frontline and Euronav) led by the same board and same CEO, but with separate listings and minority shareholders. This they contend would lead to material inefficiencies, such as competing for the same clients and the same corporate opportunities, and conflicts over commercial or investment decisions as well as complex governance issues. 

“We believe that this will be effectively unworkable and value-destructive for both the Euronav and Frontline shareholders,” the letter argues. 

They reiterate their belief that the proposed transaction does not provide a “hefty takeover premium” for Euronav while they say the company does not need to merge to improve its operations and that the combined entity would not have more pricing power in the market.

“We have invested in Euronav because we believe in the strong underlying value of the current platform and crude oil tanker markets in the next 2-3 years. We also believe in the very strong upwards value potential if the company would reinvest the proceeds of strong tanker markets in fleet diversification and decarbonized maritime and industrial solutions,” write Saverys.

The family has invested more than $600 million in 2022 to increase their position in Euronav and oppose the transaction. The sudden and rapid strengthening of the tanker market is likely further increasing their resolve.

Reporting on third quarter performance, Lars H. Barstad, Chief Executive Officer of Frontline, told investors, “The market is virtually firing on all cylinders,” while predicting it was the beginning of a prolonged upcycle.

Analysts and investors are uncertain about what happens next in the battle for control of Euronav. Last week, John Fredriksen in a surprise move sold a small portion of his investment in Euronav, while continuing to hold just under 18 percent of the company’s shares. The price of Euronav’s shares fell nearly $1 or 4 percent after the release of the Saverys’ letter but remains within its average trading range for the past month.