John Fredriksen is selling his VLGC fleet to Andreas Sohmen-Pao in a blockbuster cash-and-stock deal worth more than $1bn.
Sohmen-Pao’s BW LPG will splash $1.05bn to acquire 12 VLGCs from Fredriksen’s LPG outfit Avance Gas, including the two on sale-and-leaseback deals.
The sale will leave Avance with four medium-size gas carriers with ammonia capabilities and the second-largest holding in BW LPG, plus “substantial” cash holdings chief executive Oystein Kalleklev has promised to pass on as dividends.
“Here we have to send a tsunami warning on the size of the dividend to the shareholders,” Kalleklev told TradeWinds’ sibling publication DN.
“We asked the shareholders to check their pulse this spring — when we distributed $165m in dividends — now they have to check their pulse again here.”
Speculation of a takeover has been rife since BW LPG took a large stake in Avance just before Christmas 2020.
Sohmen-Pao and Fredriksen have also been on opposite sides of takeovers, most notably when they went head to head for DHT Holdings in an acrimonious tussle in 2017.
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.
BW LPG chief executive Kristian Sorensen said: “Today’s transaction marks a major milestone in BW LPG’s history and reflects our ability to execute large fleet acquisitions by maintaining a robust balance sheet and using the BW LPG share as an attractive currency.
“The acquired vessels will further enhance our commercial scale and increase our operational leverage in a market we expect to be strong in the coming years and, as such, solidify earnings and dividend potential.”
Sorensen, a former chief executive of Norwegian broker Fearnleys, spent a year as chief executive of Avance Gas before joining BW in 2022.
“Big day for BW LPG as we acquire 12 VLGCs from Avance Gas and welcome them as our second-largest shareholder after the transaction,” he wrote on LinkedIn.
Of the sale price, $585m will be paid in cash, a $132m novation in debt obligations for the two ships on sale-and-leaseback deals plus roughly $333m worth of BW LPG shares with the company giving Avance 19.3m at $17.25 each.
A newbuilding broker commented: “The pricing looks right on the assets. A great deal for both parties.”
The deal will leave Avance with a 12.77% holding in BW LPG.
The company will also get winter market upside, as it will deliver the vessels to BW LPG beginning in September and running through to the end of the year.
The company said the deal raises its net leverage ratio from 7% to between 30% and 35%.
Contentious M&A arena
BW LPG and Avance have long shown ambition in taking over smaller competitors in the past few years.
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 VLGC via a mix of cash and shares.
Avance 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.
