Hedge fund attacks shipping magnates over oil tanker deal

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A US hedge fund is seeking to undo a high-profile deal between Frontline, controlled by shipping tycoon John Frederiksen, and one of Belgium's oldest shipping dynasties.

Under an agreement announced last year, Frontline purchased oil tankers worth $2.35 billion from crude oil shipping group Euronav, in exchange for selling a stake in the company to Company Maritime Billing.

This deal was intended to be a solution to the impasse between the two companies over control of Euronav.

But New York-based activist FourWorld turned to the Belgian courts to nullify the deal, which made CMB Euronav's largest shareholder. It is “one of the most egregious cases we have ever seen” of a majority shareholder exploiting minority interests, FourWorld chief investment officer John Addis told the Financial Times.

The hedge fund's complaint, filed in Belgium on Monday, is the latest development in the saga surrounding New York and Brussels-listed Euronav.

Founded in 1989, the group and CMB, owned by the Savris family, became joint venture partners in 1995. In 2022, Euronav announced a US$4.2 billion merger with Frontline, to create what would have been the world's largest oil company . Tanker group.

But the Savris family, which owned about 13 percent of Euronav at the time, opposed the merger. CMB CEO Alexander Savris described it as “value destructive” and began increasing CMB’s stake in Euronav, which reached 25 percent in December 2022. He said there would be “no legal merger without our support.”

Frontline pulled out of the Euronav deal in January 2023, prompting Euronav to take legal action to try to make it happen. By March, CMB and Frontline had more board seats than independent non-executives. Two months later, Euronav CEO Hugo de Stoop left the company.

Then in October, the Savris and Frederiksen reached an agreement that they said would help end the stalemate. Frontline will buy 24 modern large oil tankers from Euronav for $2.35 billion, Euronav will drop arbitration proceedings, and CMB will buy a 26 percent stake in Euronav owned by Frontline and its affiliated groups for $18.43 per share.

FourWorld said it opposed the deal because Euronav dropped arbitration proceedings against Frontline, which the hedge fund said would have had a “very strong chance” of winning “broad damages” that would benefit minority shareholders.

Savris said winning the arbitration case is not a foregone conclusion. “The company had to push the case forward for years and years, incurring a lot of costs, keeping the company at a standstill for an indefinite period of time and all that, for a very uncertain outcome,” he said.

He added: “We insist that we are right and that we have not committed anything wrong. We will vigorously defend ourselves against these baseless allegations.”

Frontline CEO Lars Barstad said the company had not yet obtained the legal papers from FourWorld, but added: “[We] He insists that everything [Frontline’s] Transactions relating to Euronav were consistent with applicable law and regulations.

FourWorld also included in its legal complaint objections to an agreement between Euronav and CMB reached in December. Under this, the tanker group will use proceeds from the Frontline deal to buy CMB's green energy business, CMB.Tech, for $1.15 billion.

FourWorld called this “extremely harmful to the interests of the company and minority shareholders.”

A Euronav investor document from May 2022 said it had received “multiple proposals” from CMB to buy CMB.Tech, but its supervisory board believed this “would not be in Euronav’s best interest and would likely destroy shareholder value.”

Savris said the green energy business is “very different than it was two years ago” and that the board's rejection of a deal in 2022 “must also be viewed in light of what was then known as the Euronav strategy (i.e. a pure focus on crude oil) and management's preference for a merger with… “Frontline”.

In February this year – after the impasse over Euronav was resolved and the acquisition of CMB.Tech was agreed to – a tender offer was launched from CMB for the remaining Euronav shares at a price of $18.43. Most shareholders agreed.

Euronav shares are trading at around $16.40 and only about 9 percent of its shares remain in free trading.

FourWorld has also taken legal action in the Belgian Markets Court and the US District Court. In the latest case, it failed to persuade a judge to block the tender offer, but it rejected an attempt by the Capital Markets Board to seal documents related to the case.