Hafnia has been rebuffed in its attempt to merge with Ardmore Shipping in a deal potentially worth about $272.2m.
The BW Group-backed product tanker owner said that it had sent a letter to the Irish company's board of directors on 19 June proposing an all-stock transaction, but was turned down.
"We are disappointed by Ardmore’s response and continue to believe that our proposal is in the best interests of Ardmore shareholders," Hafnia said in a statement.
"We believe that large and well-capitalised shipping companies can be more cost-competitive in operations and financing, better equipped to make the necessary environmental investments to meet new regulations, and better able to provide public shareholders with scale and liquidity."
BW Group — one of the world's leading energy shipping groups — owns about 65% of Hafnia.
Based in Singapore and controlled by Andreas Sohmen-Pao, BW has been a leading consolidator in the business for over two decades.
Hafnia said the deal pegged Ardmore's net asset value at a 70% premium of its 12 June share price, roughly $8.19 based on a $4.82 close and 33.23m outstanding shares.
The deal would leave Ardmore with 17.9% of the combined entity, worth about $1.5bn while creating synergies worth between $15m and $20m per year.
Ardmore has a market capitalisation of $143m.
The proposal was highly opportunistic, substantially undervalued Ardmore and its future prospects and did not constitute a basis for engaging in discussions with Hafnia
Ardmore Shipping
In response, the New York-listed company said Hafnia's offer included a swap of one Ardmore share for 2.4 shares of Hafnia. Ardmore said it — with the help of outside advisors — decided the deal significantly undervalued the company. The implied price of $3.87 was a 28% discount on Ardmore's 30-day weighted average share price in the month prior to the offer.
Further, the proposed exchange ratio was "materially below" the implied exchange ratio of the closing share prices of each company on 19 June of 2.925 and on a 30-day weighted average basis of 3.346.
"[Ardmore's board] unanimously determined that the proposal was highly opportunistic, substantially undervalued Ardmore and its future prospects and did not constitute a basis for engaging in discussions with Hafnia," Ardmore said.
Expansion hopes
The same day Hafnia sent its 19 June letter to Ardmore, it praised Norden and Diamond S Shipping for creating a product tanker pool.
"Expansion of pools through commercial alliances demonstrates that our peers also recognise the value in market consolidation," Hafnia said at the time.
"With this week's activity in the MR segment, the industry stands more robust as it strives to rebuild the balance between supply and demand in the face of reduced oil consumption."
The company said it "would soon" launch a new venture, Hafnia Specialized, focusing on product tankers smaller than 25,000 dwt.
None of Ardmore's 25 ships are below 25,000 dwt, with 19 of its fleet in the MR segment.
Ardmore has been the subject of merger rumours, most recently in May with Oaktree Capital Management-backed Torm the other party.
Earlier that month, Ardmore posted its best-ever quarter, with $6.5m in profit, alongside record fixtures, but still saw its share price drop.
The slide appeared to have convinced its former top shareholder, Seattle-based Russell Investments, to slash its holdings by half.
In early trading on Monday, Ardmore was up $0.70, or 16.2%, to $5.01.
