DHT Holdings today delivered a stinging rejection to Frontline's ongoing takeover attempts. 

In a strongly worded letter - which saw DHT bat away Frontline's latest proposal - the New York-listed owner was critical of Frontline's past bailout, its mixed crude and products fleet and the age of its tankers. 

It also claimed Frontline had played legal "games" during the saga and suggested it was time for both companies to get back to their own business. 

In unanimously rejecting the latest in a line of merger proposals, DHT’s board said the offer was so far off the mark further discussions were unlikely to deliver a fair offer.

Way off the mark

In an open letter to Frontline Management chief executive Robert Hvide Macleod, DHT said the latest proposal once again undervalued the company and its contribution to the enlarged platform.

Emphasizing the point, DHT said its own ships would provide 50% of a combined company's net asset value and over 45% of 2018 core operating profit.

“We reject your proposal for a wide array of reasons-some perhaps even more compelling to us now than they were this past February,” the letter said.

“We would like to detail a few that should help you come to appreciate, quite frankly, just how far off the mark you are.

“Our hope is that-with a better understanding of the total inadequacy of your offer-we can all turn our focus to areas more productive for our respective businesses.”

Faith in management

The DHT board said it was incredibly pleased with its own expansion activity, noting its $538m combination in March with the BW Group VLCC fleet in a buyers’ market.

“We believe that value creation comes from additional growth at this stage in the industry cycle,” the letter said.

“We have great faith in our management team and its ability to execute on our strategic plan and maximize value for our shareholders.”

The letter also noted Frontline’s own assessment of the BW deal during US count exchanges as “not bad”. “We agree-in fact we believe it was a very good deal. So it comes as no surprise to us that you still wish to acquire our fleet,” DHT said.

“But we did not build this company simply to hand it over to you on the cheap.”

DHT board noted that while the proposed deal would be “massively accretive to Frontline shareholders”, for DHT investors the combination would bring ‘an immediate dilution in the mid-teens in NAV per share”.

Fleet in focus

DHT took aim at the Frontline fleet being “relatively older” than its own ships.

“To stay competitive in a segment where young ships are highly desirable, we expect that your upcoming capital expenditure requirements will far outstrip our own,” DHT said.

“We have been prudent in keeping our fleet youthful, while keeping leverage down and maintaining our capital allocation policy.”

A further broadside came as DHT pointed out its own prudent policy of limited leverage and cash flow allocation.

“Even in cyclical downturns, we have avoided the need to restructure,” the letter said.

“Together with management, we take full ownership and responsibility for our balance sheet-we expect never to make public scapegoats of our executives.

"We are not at the mercy of a dominant shareholder to rescue us from insolvency or restructuring.

"We have a plan designed to withstand the inevitable cyclicality of our industry. We think this plan is serving us well during trough periods with weaker earnings.”

DHT also pointed to Frontline mixed fleet of crude and products tankers, compared with its own focus simply on crude.

“If our investors desire refined product exposure and a different vessel mix that incorporates a large number of smaller-capacity ships, Frontline and other platforms are available,” DHT said. “Our near exclusive concentration on VLCCs, we believe, is a valuable asset for our public shareholders.”

Legal games

The letter concluded that it would be remiss not to highlight the “games” Frontline has been playing in court, which sought to block the BW deal.

“Your tactics have been pure gamesmanship and not designed to get to the core of your allegations, which are wholly without merit,” DHT said.

Time to move on

Addressing Macleod directly, DHT said: “Our goal today is to put our management team in the best position possible to execute DHT's strategic plan. We believe our plan is the best path towards enhancing value for DHT's shareholders.

“We believe it is vastly superior to your proposal and that the time has come to allow our management to commit to it without distraction. You have claimed, multiple times, that your proposal is final. We have taken you at your word on this point.

“We believe that it is time for both Frontline and DHT to turn our attentions to more productive endeavors.”