A dual-listing of BW LPG shares in the US capital markets paved the way for the company to close a $1bn takeover of a VLGC fleet from John Fredriksen, according to chief executive Kristian Sorensen.
The Avance Gas deal continues a run of mergers and acquisitions undertaken by BW LPG and chairman Andreas Sohmen-Pao’s wider BW Group during the past decade since the financial crisis.
The cash and shares transaction for 12 VLGCs was put together in Oslo this summer by Sorensen, Avance Gas chief executive Oystein Kalleklev and advisers from DNB and Wiersholm in just four weeks, as TradeWinds reported on Thursday.
A strategic move to trade BW LPG shares on the New York Stock Exchange in April, in addition to its long-held position on the Oslo Stock Exchange, was a critical catalyst, Sorensen believes.
“Our strategic decision to dual-list on the NYSE back in April has played a vital role in enabling this transaction,” the executive said.
“With improved stock liquidity, broader investor base and more robust pricing, [the transaction] will improve our attractiveness as a much larger shipping company and support a larger market cap and over time enhance stock liquidity,” he explained during a conference call that followed the deal on Thursday.
Sohmen-Pao is one of the largest private investors on the Oslo Stock Exchange.
However, some BW companies have been seeking extra liquidity in the US, while the investor has been critical of the Oslo Exchange and its reduced competitiveness, which has been accentuated by the decline in the Norwegian krone.
BW LPG has been a major consolidator in the VLGC space for more than a decade.
Its run of deals began in 2013, with the takeover of the Maersk Tankers VLGC fleet.
Two years later, Oslo-listed Peer Aurora LPG was also snapped up, a fleet that ironically was likewise in the sights of Avance Gas at the time.
During the past couple of years, BW LPG has also been investing outside of shipping in the LPG business.
“Just as BW LPG has done in similar transactions historically, we acquire a modern fleet without adding tonnage to the overall global fleet,” former Avance Gas executive Sorensen said.
“This increases our competitiveness as the pace of newbuilding deliveries is sharply abating in the next 18 to 24 months.”
BW LPG’s fleet will rise to 53 VLGCs with the takeover. Its owned fleet climbed by 44% to 39 ships, while the stock component of the deal boosted its share count by 15%.
“This transaction shows our commitment and capacity to strike major transactions in our core shipping business, which are of strategic significance and commercial scale,” Sorensen said.
BW LPG is established as the largest owner of VLGCs globally, with 39 vessels on the water. Petredec is ranked second with 23 and Dorian LPG third with 21, according to the BW LPG presentation.
Sorensen noted the deal also gave the company the highest number of dual-fuel and scrubber-fitted vessels in the space.
“This positions our company for improved commercial operation, with better optimisation, lower operational risk per vessel and increased earnings potential,” he said.
A takeover of the Fredriksen VLGC fleet under the Avance Gas banner extends a run of mergers-and-acquisition deals for Sohmen-Pao and BW stretching back more than a decade.
Outside of the VLGC space, the BW Group deal flow has included the 2014 purchase of a 50% stake in chemical tanker pool Womar, and a takeover of the chemical tanker fleet of Stream Tankers.
The same year saw the purchase by BW Group of the product tanker fleets of Vitol and Metrostar.
Further tanker growth came in 2017 when BW Group merged its private VLCC fleet with New York-listed DHT Holdings, which was a Fredriksen takeover target at the time.
A year later, BW Group swept up a controlling stake in Hafnia, before a 2019 return to LPG deal-making with a majority stake taken in Epic Gas.
BW LPG set the table for the Avance Gas deal the following year, when it invested in the company just a couple of days before Christmas.
Sorensen said: “For us to grow our owned fleet at the current point in the cycle we had a clear preference for a strategic transaction with scale and vessels on the water.
“With the current lead time at the yards, VLGC newbuildings can only be delivered in 2027 if not 2028.”
