Further consolidation in the tanker sector

Jun 09 2017

Tanker Investments (TIL) has confirmed that it is to merge with Teekay Tankers.

This merger will create the world’s largest publicly-traded mid-sized conventional tanker company with combined total assets of $2.4 bill, TIL said.

Each TIL common share will receive 3.30 Teekay Tankers Class A common shares representing a 21% premium to TIL’s closing share price on 30th May, 2017, and a 29% premium based on TNK’s 30-day volume weighted average price (VWAP).

“We are pleased to announce today that Tanker Investments has entered into a binding agreement to merge with Teekay Tankers, the leader in mid-size, crude oil tanker shipping and the current operational, technical and commercial manager of Tanker Investments’vessels,” explained William Hung, TIL’s CEO.“We expect the merger to be seamless, cost-efficient and create the world’s largest publicly-listed owner and operator of mid-size crude tanker assets, operating 62 ships once the merger is completed.” 
He added;“This transaction provides our shareholders with an immediate uplift in the value of their investment.The merger is also expected to be immediately accretive to earnings per share and provides TIL shareholders with the added value of a consistent quarterly dividend.In addition, shareholders have the ability to stay invested in the next tanker market upturn as part of a company with a larger market capitalisation and higher trading liquidity on the New York Stock Exchange.
“With a larger combined balance sheet and operating fleet with fully-integrated operations, we believe Teekay Tankers will be the leading tanker company in the mid-size sector positioned to take advantage of future opportunities,”he said.

"We believe Teekay Tankers presents an even more compelling investment in the mid-size tanker space with a stronger financial foundation, a much larger, younger fleet with which to service our customers globally, and our now fully-integrated tanker operations, positioning our company as the leading tanker brand in our segment," commented, Kevin Mackay, Teekay Tankers' president and CEO.

Mackay added, "The merger with Tanker Investments is expected to be immediately accretive to earnings per share, further strengthens the company's financial position, and better positions Teekay Tankers to take advantage of the next tanker market upturn. Once finalised, the acquisition will lower our average fleet age, reduce our financial leverage and increase our total liquidity position. In addition, with the acquisition of the remaining interest in Teekay Operations, Teekay Tankers has now completed its evolution into a fully-integrated conventional tanker platform with all management and operations now owned and operated solely by Teekay Tankers.."

A special committee, comprised solely of TIL’s three independent directors, was formed to evaluate all proposals received and the committee unanimously approved the merger.The committee and TIL’s board have each determined that the merger is fair to TIL’s shareholders (other than Teekay Tankers and its affiliates) and recommended that all of its shareholders vote in favour of merger on the terms presented.
The transaction’s details include an all-stock merger with Teekay Tankers at an exchange ratio of 3.30 Teekay Tankers Class A common shares for each TIL common share (other than shares already owned by Teekay Tankers). Teekay Tankers currently owns an 11.3% ownership interest in TIL and following the the merger’s finalisation , the company will become a wholly-owned subsidiary of Teekay Tankers.

Upon the completion, TIL’s shareholders (other than Teekay Tankers and Teekay Corp) will own about 30% of the combined entity, consisting of 62 conventional tankers, including three chartered-in vessels (30 Suezmaxes, 22 Aframaxes, nine LR2s and one 50%-owned VLCC). 
As part of the merger, the special committee will have the right to propose a board observer on the Teekay Tankers board, after consulting with the largest independent TIL shareholders and subject to the approval of Teekay Tankers.The duration of this observer position will run through 2018, or earlier depending on the trading price of Teekay Tankers’ common shares. 
Since Teekay Tankers already provides the technical and commercial management for TIL’s vessels, the company expects a seamless and cost-efficient integration of the two fleets.
The merger is still subject to approval of the holders of a majority of the outstanding TIL common shares and a majority of the outstanding TIL common shares other than shares held by Teekay Tankers and its affiliates. It also requires the approval by Teekay Tankers’ shareholders of an increase in Teekay Tankers’ authorised number of Class A common shares, to allow the issuing of Class A common shares as merger consideration.

Teekay Corp, which currently owns 13.6% of the voting power of Teekay Tankers’ outstanding total Class A common shares and 8.2% of TIL’s voting power, has entered into a voting and support agreement to vote in favour of the merger and the increase of the number of authorised shares available from Teekay Tankers. 

Teekay Tankers, which collectively owns 11.3% of TIL’s shares, has also agreed to vote its shares in favour of the transaction.
TIL will call an extraordinary shareholders’ meeting to vote on the  matter and TNK will call an extraordinary shareholders’ meeting to vote on an increase in Teekay Tankers’ authorised number of Class A common shares. The merger is expected to close in the third quarter of 2017.
Following the consummation of the merger, TIL will be a wholly-owned subsidiary of TNK, and TIL will apply for a de-listing from the Oslo Stock Exchange.

Separately, Teekay Tankers has acquired the remaining 50% interest in Teekay Corp's commercial and technical management operations for about $27 mill, consolidating all commercial and technical management operations under Teekay Tankers.
Sullivan & Cromwell is serving as legal counsel and Evercore is serving as financial advisor to TIL’s special committee.  


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