EURONAV TALKS THE EBB AND FLOW OF A $2BN TRANSACTION
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
EURONAV TALKS
THE EBB AND FLOW OF A $2BN TRANSACTION
JUNE 2018
1
CONTENT 1. Patience & Discipline 2. Confidentiality 3. Maintain Contact 4. Value Creation 5. Lessons Learned
PATIENCE & DISCIPLINE When we started the process in 2016: o Oil price was USD 48 o Trump was 20% odds to be President o Leicester City had never won the Premier League o Chicago Cubs hadn’t won a World Series since 1909 o Ireland had never beaten New Zealand at rugby o U.S. President never met North Korean Leader
Actively managed high quality fleet…
EURONAV M&A RULES
Strong balance sheet is a hedge against cyclicality
o Tanker business is cyclical which the only cure is to have a strong balance sheet
and liquidity pool
o Policy to retain at least two years of operational liquidity at all times and
maintain strong banking relationships
In Theory In Practice
Acquisition criteria Since 2014
1. Keep strong balance sheet – leverage c 50% o 25 vessels acquisition + 21 Vessels merger
2. Retain liquidity runway at least 2 years o high dividend yield adjusted to fixed dividend
3. Keep or lower average break-even o Maintain strong balance sheet ≈ 50% (leverage)
o Maintain a high liquidity positionTIMELINE 2017
New 5y FSO
contract
May 2017 Euronav and
New 408m revolver
Jan 2017 Gener8 propose to
merge
Dec 2017
4 VLCC S&LB 150m bond
Jan 2017 May 2017
2017
Ofer acquires 5% of
Gener8
Feb 2017 FRO tries to buy
Gener8 (press leaks)
Jun 2017
= Sale old Euronav vessel
4 in total in 2017
= Sale old Gener8 vessel
8 in total in 2017LIQUIDITY BUILT UP IN PREPARATION OF
POTENTIAL TRANSACTION
Liquidity Marked to market leverage
875 56%
54%
775
52%
675
50%
$m Liquidity
575 48%
46%
475
44%
375
42%
275 40%
2016 2016 2017 2017 2017 2017 2018 2018
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2CONFIDENTIALITY
o Leak is your enemy in public companies M&A
o Work with a very limited number of people
Share price reaction Share price reaction
post a rival proposal post Euronav agreed offer
Rival share price reaction post GNRT offer Euronav share price reaction to announcement
GNRT share price reaction post rival offer GNRT share price reaction to announcement
5.9 6.5 7
9.6
5.8 9.4 6.5
6
9.2
5.7 6
5.5 9
5.6 8.8 5.5
5 8.6
5.5 5
8.4
4.5 4.5
5.4 8.2
8 4
5.3 4
20 Dec 17 27 Dec 17 03 Jan 18
1 Jun 17 8 Jun 17 15 Jun 17 22 Jun 17MAINTAIN CONTACT AND GET ACQUAINTED
o Maintain an open dialogue with key stakeholders at all time
o Understand who is the key decision-maker:
15.7% 10.7% 9.4%
8.8% 7.5% 6.5% 5%VALUE CREATION
o Don't be greedy: value need to be there for both sides
o Don't forget the hidden costs
o Forget about screen price
NAV GNRT NAV EURN
Asset Asset
Cash Cash
Vessels Vessels
Debt Debt
Loans Loans
Bonds BondsVALUE CREATION
o Don't be greedy: value need to be there for both sides
o Don't forget the hidden costs
o Forget about screen price
NAV GNRT NAV EURN
Asset Asset
Cash Cash
Vessels Vessels
FSO Extension + Residual Value
Brand value as crude transporter of choice
Never defaulted
Customer quality and reliability
Debt Debt
Loans Loans
Bonds BondsVALUE CREATION
o Don't be greedy: value need to be there for both sides
o Don't forget the hidden costs
o Forget about screen price
NAV GNRT NAV EURN
Asset Asset
Cash Cash
Vessels Vessels
FSO Extension + Residual Value
Brand value as crude transporter of choice
Never defaulted
Customer quality and reliability
Debt Debt
Loans Loans
Bonds Bonds
Transaction Costs Transaction CostsCOMBINED BUSINESS
MAJOR POWERHOUSE IN LARGE CRUDE TANKERS SEGMENT
20
Euronav
VLCC Suezmax
Combined
15
VLCC Suezmax
Total Fleet DWT
21
28
10
27
Gener8 5
43
VLCC Suezmax
0
6
15
+ 2 FSO, 2 ULCC & 2 LR2s
18.9 million DWT in total in pro-forma combined business*
* For total pro-forma business including FSOLARGER LIQUID PLATFORM
FIRST INDUSTRIAL BIG TANKER PLAYER : Euronav post- merger top holders
Pure play 7.3%
Saverco NV
7.2%
Big market cap 4.3% Châteauban SA
High liquidity (ADTV) 4.2%
Oaktree
Victrix NV
Best in class corporate governance 3.7%
M&G (Prudential)
3.5%
No related party / conflict of interest 69.3% 0.5%
Fidelity
Euronav (treasury shares)
Best in class operation Other Shareholders
Best in class chartering
Big enough to have an impact on markets
MARKET CAP
Maximize optionality –
play the tanker earnings cycle $1.5B $2.0B*
*@$9.10STRONG PRO FORMA FINANCIALS
Leverage
Repayment schedule and RCF reductions Highlights
600
Millions
Bond Maturity
500
o Credit margins between 1.225% and 2.25% (Bond
7.5%)
400 Undrawn balloon to
be refinanced o Most of the secured bank debt is revolving
300 o Strong relationships with the leading international
Balloon to be
refinanced shipping banks
200
Repayments
o No material debt maturities until 2020
100 o Revolving credit facilities reduce by $138m/year
0 Reductions (non- o Cash debt amortizations on term loans: $55m/year
cash)
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Covenants Strong & supporting banking relations
o Liquidity (minimum USD 54.3 million):
USD 817 million (Q1-18)
o Equity Ratio (minimum 30%): 64.5%
(Q1-18)
o Working Capital (positive):
USD 662.8 million (Q1-18)CONCLUSION o It takes an awful lot of time to close a public transaction: o Banks support o Capital market support o Don't underestimate transaction costs o Bring all elements together in one place o Stick to guns o Be discreet o Have patience and flexibility o Respect people
You can also read
