A promising merger with Euronav, busted
When two of the biggest players in the shipping world, Euronav and Frontline, announced plans to merge (“combination agreement”) in 2022, minority shareholders, jointly owning over 75% of the company, looked set to make a handsome return.
Former owners Compagnie Maritime Belge (CMB), however had other plans for Euronav and opposed the merger publicly. As a result, Frontline, in a surprise last-minute twist, blew up the merger in January 2023, and instead divided Euronav’s assets with CMB. Euronav immediately launched an arbitration procedure against Frontline for reneging on the deal.
CMB is owned by the Belgian shipping family, the Saverys. Frontline, in turn, is controlled by Norwegian shipping tycoon, John Fredriksen.
Frontline sails away with a prime fleet
Now with joint control, and following the departure of independent board members who were voted out, shareholders Frontline and CMB forced Euronav to abruptly abandon its long-standing and successful business strategy. In a three-part deal announced on October 13, 2023, they made Euronav sell its best and newest assets (a top-tier crude oil tanker fleet) to Frontline for $2.35 billion. Euronav was also forced to abandon its merger arbitration claim against Frontline without compensation, despite expert valuations in excess of $500 million. On September 6, 2024, the Belgian Markets Court ruled that the fleet sale amounted to a significant “special indirect benefit” for Frontline. Agreeing with FourWorld’s petition the court ruled this should have been reflected in a higher share price during the mandatory takeover offer.
CMB keeps the remainder of Euronav… for its own purposes
In exchange for these sweet deals at the expense of Euronav minority shareholders — who were kept in the dark until the agreements were signed in October 2023 — Frontline simultaneously sold its stake in Euronav to CMB for $18.43 per share, a price the Belgian Markets Court ruled was at least $0.52 too low. CMB was then able to get hold of the cherry on the cake: its mandatory takeover bid for the remaining Euronav shares at that same low price.
Weeks later, CMB ensured that Euronav, now under its full control, purchased its ailing subsidiary CMB.TECH, a capital-intensive venture of unproven technologies. The purchase price of $1.15 billion was particularly generous, considering that just a year earlier, Euronav had rejected offers to purchase the company for $700 million.
Backed by experts, Euronav’s supervisory board had previously concluded, that the purchase made little sense financially for Euronav shareholders. The board also stated that it was in opposition to Euronav’s proven and successful business strategy. Euronav was not alone in rejecting CMB’s offers: prior to approaching Euronav, CMB had tried unsuccessfully to sell CMB.TECH to private investors and to float the company on the stock exchange. Public markets had no interest, and private investors expressed governance concerns.
CMB has gone on to erase Euronav, renaming it after its former subsidiary, CMB.TECH. CMB continued to sell-off Euronav’s assets, divesting the company’s ship management subsidiary, Hellas, in April 2024.
American fund fights back
FourWorld Capital Management LLC has picked up the fight in the interest of other minority shareholders, raising questions and objections at each Euronav and CMB.TECH AGM. Given CMB and Frontline’s unwillingness to voluntarily make things right, FourWorld is now acting before the Belgian courts to restore Euronav to its previous state by unwinding what it believes to be abusive and detrimental transactions worth $4 billion.
On September 6, 2024, the Belgian Markets Court ordered the FSMA to review the share price retrospectively. The court also recommended CMB should pay a supplemental price of at least $0.52 per share in its mandatory takeover offer. On October 7, 2024, the FSMA complied, obliging CMB to re-open its bid and pay $36 million to Euronav’s minority shareholders.
Crucially the Markets Court also concluded that the Euronav supervisory board was sidelined and then coerced by CMB and Frontline into approving the deals. While FourWorld maintains the supplement should be much higher, the court’s decisions and findings pave the way for success in its legal challenge before the Antwerp Enterprise Court.