Ardmore turns down Hafnia’s acquisition proposal

Tanker owner and operator Ardmore Shipping Corporation has declined an acquisition proposal from Hafnia Limited, saying that the offer substantially undervalued Ardmore.

Established ten years ago, Ardmore owns and operates a fleet of MR product and chemical tankers ranging from 25,000 to 50,000 deadweight tonnes.

The tanker owner said it had received an unsolicited acquisition proposal from Oslo-listed Hafnia on June 19, 2020.

Under the all-stock transaction, each Ardmore share would have been exchanged for 2.4 shares of Hafnia common stock. The deal is potentially worth $272.2 million.

After reviewing the bid, Ardmore said “the proposal was highly opportunistic, substantially undervalued Ardmore and its future prospects, and did not constitute a basis for engaging in discussions with Hafnia.”

As explained, the proposed exchange ratio implied an offer price to Ardmore shareholders of $3.87 per share, which represented a discount of approximately 18% to the Ardmore share price on June 19, 2020 and a discount of more than 28% to the volume weighted average share price of Ardmore over the 30 days prior to the proposal.

“The proposed exchange ratio was materially below the implied exchange ratio of the closing share prices of each company on June 19, 2020 of 2.925. It was also materially below the implied exchange ratios between the two companies of 3.346 when looking at the volume weighted average share price for each company for the 30 days prior to the proposal,” Ardmore added.

Hafnia said that they received the rejection in less than two weeks after they issued the proposal, adding that there have been no substantive follow-up discussions or negotiations between Ardmore and Hafnia or their respective advisors.

“We are disappointed by Ardmore’s response and continue to believe that our proposal is in the best interests of Ardmore shareholders. A centerpiece of our business plan is our focus on creating shareholder value.

“We believe that large and well-capitalized shipping companies can be more cost-competitive in operations and financing, better equipped to make the necessary environmental investments to meet new regulations, and better able to provide public shareholders with scale and liquidity. By optimizing for these benefits, we are confident that the combined company would provide significantly higher value for Ardmore and Hafnia shareholders in both the short- and the long-term,” Hafnia said in a statement.

The proposal was seeking to establish a joint entity with a combined NAV of approximately $1.5 billion and significantly improved market cap, with potential for greater liquidity and dividend capacity for its shareholders, Hafnia said.

Hafnia paid a quarterly dividend for Q1 2020 of $38.5 million equivalent to an annualized dividend yield of approximately 24%.

Furthermore, Hafnia claims that synergies of $15-20 million per year would have been created from the combination.

The company was seeking control of approximately 17.9% of the combined entity, described as ‘global industry leader in the oil product tanker market, with a controlled fleet of 210 vessels.’

The bid is being revealed on the back of the recent consolidation move in the MR sector between Diamond S and Danish Norden.

Under the arrangement, Diamond S will initially contribute 28 medium range (MR2) product tankers to the endeavor, which will be marketed and operated through the Norient Product Pool (NPP).

Commenting on the deal at the time, Hafnia welcomed the consolidation push within the tanker sector, adding it was working on another tie-up with its peers.

Hafnia is a big supporter of market consolidation due to its potential to restore the balance between supply and demand, especially at a time when the market fights for recovery from the pandemic’s impact.

The tanker major made a massive push in that direction with the completion of a merger with BW Tankers last year, the biggest fully-fledged product tanker merger to date.

The merged company owns and operates a fleet consisting of 102 product tankers, four newbuildings, and three product tanker pools, managed by Hafnia Management and Straits Tankers with vessels in the LR2, LR1, MR and SR segments.