Bermuda-based oil tanker shipping company Frontline has agreed to acquire ten Suezmax tankers from Trafigura Maritime Logistics (TML).
All the Suezmax tankers were built this year and are equipped with exhaust gas cleaning systems.
Frontline will purchase a TML special-purpose vehicle, which holds the ten Suezmax tankers.
According to the stock-cash deal, the shipping business will offer its 16,035,856 ordinary shares as a consideration at an agreed price of $8 per share, issuable upon signing.
The company will pay between $538 to $547m following the completion of the transaction.
To fund the acquisition, Frontline is currently in discussions with lending banks.
An affiliate of Hemen Holding, which is also the largest stakeholder of Frontline, has offered $547m under a three-year facility.
The deal is expected to close in November at the earliest or March 2020.
Upon the completion of the deal, Trafigura will own nearly 8.48% of the ordinary shares of Frontline.
Until the deal is completed, Frontline will time-charter the ten vessels from Trafigura at a daily rate of nearly $23,000 to gain earlier access to the tankers.
The shipping company has agreed to charter five of these vessels back to Trafigura on three-year charters at a daily base rate of $28,400.
Frontline Management CEO Robert Hvide Macleod said: “This transaction is backed by our strong belief in tanker market fundamentals and reflects our ability to act swiftly and decisively with the support of our largest shareholder. We welcome Trafigura as a strategic shareholder and believe the acquisition reflects the value Trafigura ascribes to our equity.
“In addition to Trafigura being a long-standing customer of Frontline, we now have a unique partnership that we believe will lead to further synergies going forward.
“The structure of the transaction creates an immediate impact on our earnings at a time when we expect freight rates to increase significantly. Moreover, we expect the Acquisition to boost our dividend capacity going forward.”
The deal enables Frontline to purchase four new Suezmax tankers by acquiring TML’s second special-purpose vehicle.