Ardmore Shipping knew pretty quickly Hafnia's merger proposal was not a good one.
A source close to the situation said the BW Group-backed suitor's 19 June deal — made public on Monday — undervalued Ardmore by more than 18%.
In its press release disclosing the offer, Hafnia said it was offering a 70% premium in an all-stock net asset value to net asset value deal on Ardmore's 12 June closing price of $4.83.
"That's just not the case," said the source, calling the move "clever" on Hafnia's part.
In reality, the source said, and as Ardmore disclosed later on Monday, Hafnia was offering 2.4 shares for each Ardmore share.
Hafnia's shares closed on 12 June, the trading day the deal was based on, at NOK 15.86, or $1.64.
At that price and exchange ratio, Ardmore was getting a total of $3.93 for each share, or an 18.5% discount to its $4.83 closing price that day.
If Hafnia was paying cash, the $270m figure would work, with the maths working out to $8.12, based on nearly 33.3m outstanding Ardmore shares.
But in an all-stock deal, the figure was much lower, at $130.6m, the source said.
Hafnia said the deal would save the combined $1.5bn New York and Oslo dual-listed company as much as $20m.
It is likely that the combined entity would have a bigger fleet than the current leader, Scorpio Tankers, with a market capitalisation to match.
However, no negotiations between the two companies are ongoing, after Ardmore rejected the deal two weeks after it was made following its vetting by outside legal and financial advisors.
The source's calculations were echoed by Webber Research head Michael Webber in a note on Wednesday.
"This was a clear non-starter for [Ardmore], we’re actually a bit surprised BW would choose to push the offer publicly, given it's actually at a discount to [Ardmore's] current market valuation," he wrote, agreeing with other analysts who described the offer as "lowball" or a "non-starter".
On the back of the merger news, Ardmore closed on Monday at $5.01 after opening at $4.58. Those gains were erased by the end of trading on Tuesday, falling to $4.57.
On Wednesday, shares finished the day up $0.08 to $4.65.
TradeWinds has contacted Hafnia for a response.
