Euronav investors should take the money and run, Evercore’s Jonathan Chappell recommends.
The veteran analyst said when the Belgian tanker giant offers $18.43 per share, investors should take them up on their offer, as the Saverys family’s strategy on decarbonisation and diversification could take years to complete.
“Decarbonisation, future-proofing and diversification may well be the best investment thesis of all time, but it will take a long time to play out and does not offer the same immediate-term returns of a high-dividend paying tanker company with material operating leverage in one of the best cyclical backdrops in decades,” Chappell said in a note published late on Monday.
“Investors can now play this tanker thesis through [Frontline] (or other publicly listed entities), but remaining a minority shareholder through the evolution of the entity ... would not be our preference.”
In a deal announced on Monday, Euronav will sell 24 of its most modern VLCCs to Frontline for $2.35bn, while agreeing to buy Frontline’s 26.1% stake for $18.43 per share.
In accordance with Belgian law, Euronav will have to offer the same price for all minority shareholders.
“In our view, investors should take this offer and cash out,” Chappell said.
The agreement — first reported by TradeWinds in late September, then confirmed last week by Euronav and agreed to by both parties on Monday — brought to a close an 18-month battle for Euronav.
Frontline initially wanted a $4.2bn takeover, but the Saverys family opposed the deal and built a 25% stake in Euronav through its Compagnie Maritime Belge (CMB) to block the merger.
The Belgian shipping dynasty said on Monday that it wants to begin pushing into other shipping segments, potentially by acquiring CMB-owned vessels that have eco designs or run on alternative fuels.
The family said it intends to retain Euronav’s dual listings in Brussels and New York.
Chappell’s net asset value estimation for Euronav is $20.50, revised down from $20.74, but most of that figure was cash the company will probably invest outside the tanker market.
He revised Euronav’s price target to $19 from $24 to reflect the CMB offer.
In early trading on Tuesday, Euronav shares slipped slightly, losing €0.06 ($0.06) to €16.66.
