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Editor in chief: Angelo Scorza
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02/09/19 12:36

Fredriksen and Trafigura make a comprehensive big deal

Establishment of a captive joint venture active in the bunkering business and the sale of 10 tankerships to the Oslo-based shipowner

The big deal officialised in middle August between shipping magnate John Fredriksen and giant trading house Trafigura started with an announcement about the establishment of a captive joint venture active in the bunkering business between the Geneva-based multinational with Frontline Ltd and Golden Ocean Group.

The non-binding agreement is aimed at a leading global supplier of marine fuels in which Frontline and Golden Ocean will acquire 15% and 10% respectively and Trafigura will contribute its existing physical bunkering activities. The joint venture is expected to commence operations in the third quarter of 2019 acting as the exclusive purchaser of marine fuels for Trafigura, Frontline and Golden Ocean, as well as certain entities affiliated with Hemen Holding Ltd, which is Frontline and Golden Ocean’s largest shareholder.

Admittedly the initiative is in relation with the IMO 2020 resolution, “that will create logistical marine fuel supply issues for shipowners globally. In addition to presenting a compelling economic opportunity, our participation in the JV will ensure our ability to source and acquire marine fuels at competitive prices on a continuous basis. This transaction represents yet another instance where we have been able to leverage our relationship with other entities of Hemen Holding Ltd to create significant economies of scale and a real competitive advantage and to give birth to one of the world’s leading suppliers of marine fuels” says an official statement. “Over the past 24 months, Trafigura has been growing its physical bunkering business worldwide, marine fuel market disruptions will be brought on by the implementation of IMO 2020 regulations and the JV’s increased base volumes and greater access to both infrastructure and credit will provide increasingly competitive bunkering supply services to our customers. the JV partners as well as to third party shipowners and operators”.

However the stake was raised up little later when in just two weeks after that announcement, Frontline, the Oslo-based oil tanker company backed by shipping magnate John Fredriksen, entered into a sale and purchase agreement with Trafigura Maritime Logistics (TML), a wholly-owned subsidiary of Trafigura Pte Ltd, to acquire 10 Suezmax tankers built in 2019 in South Korea, all fitted with exhaust gas cleaning systems, through the acquisition of a TML special purpose vehicle which holds the vessels; also, Frontline has options to acquire 4 more Suezmax tankers built in 2019 through the acquisition of a second TML special purpose vehicle.

The transaction consideration consist of 16,035,856 ordinary shares of Frontline at an agreed price of USD 8.00 per share issuable upon signing, plus a cash amount from USD 538 to 547 million, payable upon closing of the acquisition, targeted between 15 November and 15 March 2020.

Frontline has agreed to time charter all 10 vessels from Trafigura at a daily rate of USD 23,000 and to charter 5 vessels back to Trafigura on 3-year time charters at a daily base rate of USD 28,400 with a 50% profit share above the base rate

Following the acquisition, Trafigura will own 8.48% of the ordinary shares of Frontline, and Frontline will have a total of 189,153,166 outstanding shares par value USD 1.00 each

Also Frontline has two options to acquire 2 more Suezmax tankers due to expire on September 12 and 24. All 4 option vessels are 2019 Chinese built and fitted with exhaust gas cleaning systems.

Following acquisition of 10 Suezmax tankers from Trafigura, Frontline’s fleet will consist of 75 vessels, including newbuildings, aggregate capacity of 14.2 million DWT, average age of 3.7 years.

At present Frontline Ltd. owns and operates 63 vessels with an aggregate carrying capacity of approximately 12.2 million dwt and an average age of 4.3 years.

Listed on both the NASDAQ and Oslo Stock Exchanges, Golden Ocean is a dry bulk shipping company which owns or controls 77 vessels with an aggregate carrying capacity of 10.7 million dwt and an average age of 6 years; its commercial platform manages 44 vessels on behalf of third parties.

By its side, founded in 1993, Trafigura sources, stores, transports and delivers a range of raw materials (including oil and refined products and metals and minerals) to clients around the world. The trading business is supported by industrial and financial assets, including 49.3% owned global oil products storage and distribution company Puma Energy; global terminals, warehousing and logistics operator Impala Terminals; Trafigura's Mining Group; and Galena Asset Management. The Company is owned by 700 of its 4,300 employees who work in 66 offices in 38 countries, and has achieved substantial growth over recent years, growing revenue from USD 12 billion in 2003 to USD 180.7 billion in 2018.

 

Angelo Scorza

 

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