Nasdaq-listed Torm said on Monday it agreed to acquire eight MR product tankers from Team Tankers — a move that takes Team Tankers one step further towards ultimately being sold.
Torm said it would spend $82.5m and issue 5.97m shares to finance the deal, which will boost its fleet size to 83 vessels, after Team Tankers delivers the units in the second and third quarters of this year.
“The assets complement our fleet very well,” Torm chief executive Jacob Meldgaard told TradeWinds. “They are in the MR segment where we have traditionally a stronghold…and they also come with chemical capabilities that can supplement our business.”
Brokers estimate the combined market value of the vessels purchased at $148m, Denmark-based Torm said. They were all built between 2007 and 2012 at Croatia’s Brodotrogir shipyard and have high technical specifications.
The value of a 10-year-old MR has decreased by almost 8% over the past year, according to VesselsValue.
“We had a good time on the cycle,” Meldgaard said. “We've experienced a softer freight rate environment [in recent months] and asset prices have also reacted negatively.”
In addition to the cash paid, Torm said it plans to issue shares to Team Tankers progressively, as it takes delivery of each vessel.
“The agreed individual share issuances are subject to adjustments related to potential capital increases and shareholder distributions, as applicable,” Torm said.
Following the transaction, Team Tankers is expected to own 7% to 8% in Torm but have no board representation.
“They are not selling up completely because they will become a shareholder on the Torm platform,” Meldgaard said.
The eight Team Tankers MR units are listed on the Connecticut-based company's website under its fleet of 20 owned vessels. The rest of its fleet is made up of small oil carriers.
Team Tankers still manages the 46,800-dwt Endo Breeze (built 2003), which it sold to Malta’s Endo Tankers in 2019 while chartering it back for three years.
Team Tankers has been known to be offloading tonnage as it restructures the company to ultimately sell it and drive industry consolidation forward. The company delisted from the Oslo stock exchange in September 2020.
“We were not going to be a consolidator because it requires too much capital. So we decided to restructure the company to make it a more attractive acquisition target," Morten Arntzen, Team Tankers' executive chairman, told TradeWinds in December.
In October 2020, brokers reported it was circulating as sale candidates two of the units it now sold — the 46,000-dwt Team Allegro and Team Amorina (both built 2012). It had acquired these ships three years ago, as part of a $206m acquisition of Swedish tanker owner Laurin Maritime.
“Regarding the ex-Laurin ships, we are prepared to sell them, but [we are] not in a rush to do so,” Arntzen said in October.
In November, Team Tankers sold seven 8,000-dwt stainless-steel parcel tankers and the Team organisation in Marbella, Spain, to De Poli Tankers of the Netherlands.
Attractive terms
Torm said in its statement it obtained attractive financing terms for the eight vessels it acquired from Team Tankers. In order to finance the five ships built between 2009 and 2012, a bank syndicate led by ABN Amro lent the company $67m to top up an existing, older credit facility.
Hamburg Commercial Bank stepped in with another new $28m loan to finance the acquisition of the three oldest units, which were built in 2007 and 2008.
Torm's new loans mature in 2026.
The acquisition was announced when Torm posted stronger underlying results for 2020, mainly due to higher spot earnings during the first half of the year.
Ebitda increased to $272m from $202m in 2019, while revenue rose to $747m from $693m.
The company recorded a net profit of $88m versus $166m in 2019, which included an impairment reversal of $120m.
Meldgaard said the market could begin to recover in the second half of 2021 if mass vaccination takes place in major economies, prompting more consumption and shipping demand of refined products.
“A change in the soft market that we've got right now will coincide with the completion of the roll-out of the vaccination programs worldwide,” he added.
Torm's share price fell 1.78% to DKK 49.8 ($8.08) on Nasdaq Copenhagen and 4.92% to $8.31 on Nasdaq in New York at the time of writing on Monday.
