US tanker owner International Seaways is doubling its net asset value by buying rival Diamond S Shipping.
The New York-listed company has now confirmed an all-shares deal first reported by TradeWinds earlier on Wednesday.
International Seaways said the transaction, with an enterprise value of $2bn, creates the second-biggest US-listed tanker owner by vessel count and the third largest measured by cargo capacity.
"Significant" synergies and efficiencies are expected to drive annual cost savings of more than $23m.
International Seaways' shareholders will own 55.75% of the new company, with Diamond S investors having 44.25% after receiving stock worth $416m.
Complementary fleets
The companies said the merger unites the two operations' "long-term customer relationships, similar cultures, and complementary positions in key tanker sectors".
The deal will boost the unified shipowners' capabilities in both the crude and product markets and create "power alleys" in VLCC, suezmax and MR markets, as well as in LR1s and panamaxes.
The combined fleet will number 100 ships of 11.31m dwt, with revenue of more than $1bn.
The new entity will also enjoy more liquid share trading, International Seaways said. The market capitalisation is estimated at $1bn.
The net debt leverage ratio will be 42%, one of the lowest in the tanker sector and across global shipping, International Seaways claimed.
Existing International Seaways shareholders will also receive a special dividend of $1.10 per share before the deal closes in the third quarter.
Douglas Wheat will remain as chairman, while chief executive Lois Zabrocky will also stay on. Jeffrey Pribor will continue to serve as chief financial officer.
Current Diamond S chief executive Craig Stevenson will become a director of the new operation, and also act as a special advisor to Zabrocky for six months to ensure a smooth transition.
"We are excited to enter into this transformational transaction and create an industry bellwether," said Zabrocky.
Compelling benefits
"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," she added.
Stevenson said both companies share a similar focus on people, safety, meeting customer expectation, maintaining balance sheet strength and appropriately managing leverage in an inherently cyclical industry.
"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," he added.
Diamond S' management agreements with Evangelos Marinakis' Capital Ship Management will be phased out over time, the companies said.
