Avance Gas Sells Fleet of Large Gas Carriers in $1B Deal With BW LPG
Avance Gas completed its successful exit from the gas carrier marketing agreeing to sell its remaining fleet of 12 vessels to BW LPG in a deal valued at over $1 billion. The company which had well-known shipping magnate John Fredriksen as its lead shareholder, cited the opportunity to realize strong market values while BW highlights the opportunities for scale, flexibility, and operational leverage in what it called “the fast-growing LPG space.”
Despite freight rates reaching a new all-time high in 2023 and citing strong demand for seaborn transport of LPG, Avance had been moving to sell its fleet. In the first half of 2024, the company sold four VLGCs realizing a gain of $121 million. That transaction came after the company had previously sold the oldest vessels in its fleet. They reported today’s deal generates a further gain of between $310 and $320 million on a fleet with a book value of approximately $740 million.
The company highlighted that it had one of the youngest fleets in the sector. Six of the vessels have already been outfitted with scrubbers and several already have the capability to transfer from carrying liquified petroleum gases including propane and butane into the emerging market for ammonia transport. The carry capacity includes four 91,000 cbm VLGCs and eight 83,000 cbm. The vessels were built in 2015 and the newer, largest vessels in 2022 and 2023.
“The fleet of Avance Gas is today a bit sub-scale and we have therefore found it more attractive for our shareholders to take advantage of the relatively high second-hand prices and sell the VLGC fleet to BW LPG,” said Oystein Kalleklev, Chief Executive of Avance Gas Holding.
Avance Gas traces its roots to 2007 and the creation of Stolt-Nielsen Gas which was set up to pursue opportunities in the expanding market for the transportation of liquefied petroleum gas. Avance began trading in 2009 and grew through a series of transactions as well as newbuilding efforts. They highlighted a recovery in the market in 2019 saying the company was well positioned with a premium fleet that was operating with low G&A and OPEX expenses.
“This fleet expansion comes at an opportune time with VLGC newbuild deliveries abating and continued growth in global LPG export volumes,” BW said in announcing the acquisition. “This further solidifies BW LPG’s position as the world’s leading owner and operator of VLGCs, with the largest number of LPG dual-fuel powered VLGCs.”
The company highlights that the transaction will add significant scale to BW LPG’s fleet. It increases the number of owned and operated VLGCs from 41 to 53, of which 22 are LPG dual fuel. Avance reports the handovers will take place between September 15 and December 31, 2024.
Under the terms of the deal, the bulk of the consideration is stock which will make Avance Gas the second-largest shareholder of BW LPG. It will hold 12.77 percent of the shares of the company. Avance will also receive a cash consideration of $585.4 million which will be used to repay existing bank debt and the novation of two sale-leaseback agreements.
Avance Gas in 2023 also placed orders for a total of four midsize gas carriers to be built at China's CIMC. The vessels which are scheduled for delivery in 2025 and 2026 are dual-fuel, able to use fuel oil as well as LPG. The new ships will have a capacity 40,000 cbm and are seen as possible attractive for the ammonia transport market. The company notes that it is keeping the four under construction vessels.