John Fredriksen’s Avance Gas is mulling its identity after selling its VLGC fleet to BW LPG in a $1bn deal, which took shape while the rest of the Oslo shipping community was on summer holidays.
Andreas Sohmen-Pao’s BW today revealed a cash and shares swoop for 12 Avance Gas’ VLGCs. It comes more than three years after Avance Gas first became a shareholder in its Oslo-listed rival but just weeks after the first discussions took place.
Avance Gas chief executive Oystein Kalleklev told TradeWinds the deal with BW LPG had been put together in the past four weeks.
Kalleklev knowing his counterpart at the buyer well helped speed up the deal. BW LPG chief executive Kristian Sorensen spent a year in the top job at Avance Gas before swapping camps in 2022.
Sorensen told TradeWinds the parties began the dialogue during Marine Money in New York in June. “There were non-binding discussions,” he said.
“It has been a relatively fast process. It is because we have focused on that it should be a balanced deal using our shares and bringing the shareholders of Avance Gas on the journey.
“We solidify our role as the leading VLGC player in the shipping space. We make this transaction because we think it is right both commercially and to create a bigger unit in the capital markets. It is a big day, it is a big milestone.”
Kalleklev said Avance Gas had become “subscale” and BW LPG needed to renew its fleet. “Everybody’s happy,” he added.
Avance Gas is left with four medium gas carriers with ammonia capabilities and the second-largest holding in BW LPG, plus “substantial” cash holdings Kalleklev has promised to pass on as dividends.
He said Avance Gas has been selling off its older VLGCs to renew its fleet. Those deals include the sale of two newbuildings this year.
The ships were sold at $120m each, which ranks as a historically high price for this type of vessel.
Kalleklev said the company had achieved a “fantastic price” on its 12 remaining ships from BW LPG.
He would not be drawn on any definite plans for Avance Gas. However, he said the company will continue to trade the VLGCs for the rest of this year when the BW LPG deal is set to close.
He said the four remaining MGCs, for delivery in 2025 and 2026, were contracted at $61.5m each.
This compares with prices in the low $70m for similar newbuildings for 2027 handovers.
Kalleklev said Avance Gas can choose to fix these long-term or sell them at a profit and suggested Avance Gas could also morph into a new vehicle for the ammonia and MGC trades.
He said the company believes the ammonia trade will initially be more suited to MGC vessels.
“Whatever is best for our shareholders,” Kalleklev said. “We are pragmatic. If we sell, we will do that. If we charter, we will do that, or we might do consolidation.”
BW LPG, already the largest player in the space and now listed in New York and Oslo, will grow its VLGC fleet from 41 to 53 with the swoop.
Stock as currency
Sorensen said: “We based the whole discussion on that we should have a balanced deal based on NAV [net asset value] to NAV valuation of the companies.
“We would not have done this if we could not use the stock as a currency and if we could not make a transaction that is strategically important and has a scale that makes it interesting in today’s market.”
Sorensen said it was also important to get 12 ships delivered on the water now during the fourth quarter rather than wait for newbuildings with delivery in 2027 and 2028.
“And of course, based on our market view, this will be an accretive deal for our shareholders because we create a much bigger unit, from a capital markets perspective and a commercial market viewpoint,” he said.
Avance Gas was previously an outspoken advocate of consolidation under previous management but has now ended up being taken out by BW LPG. Its chairman, Sohmen-Pao, has a long history of shipping takeovers.
In 2015, Avance offered to merge with Aurora LPG via a shares swap, but the takeover bid failed to secure enough backing from Aurora shareholders.
In the following year, BW LPG managed to acquire Aurora and its nine VLGCs via a mix of cash and shares.
Avance Gas and BW LPG have both made attempts to merge with Dorian LPG, the third-largest VLGC owner.
Those efforts failed to bear fruit partly because Dorian chairman John Hadjipateras did not think the prices were right.
In 2019, BW Group successfully executed a $120m takeover of Epic Gas, which owned 39 LPG carriers between 3,500 cbm and 11,000 cbm. It has also completed deals in the crude and product tanker markets with DHT Holdings and Hafnia.
