3 Reasons DHT Holdings Is Going To Reject Again
Apr.26.17 | About: Frontline Ltd. (FRO) Get Alerts
Bram de Haas
Bram de Haas
Deep value, special situations, long-term horizon
PREMIUMThe Black Swan Portfolio
(3,566 followers)
Summary
The acquisition premium isn't generous.
The board responded with a version of: "we rejected the same offer already but whatever."
Frontline is offering shares, and it's not a currency in high demand.
DHT Holdings (NYSE:DHT) jumped pre-market by 4.9% after Frontline (NYSE:FRO) reiterated it would buy all remaining shares it doesn't own already for 0.8 Frontline shares each. The chance must be non-zero the offer will be accepted, but I'm granting the same odds to hell freezing over.
Frontline's offer isn't particularly generous
Frontline is offering an "18% premium to DHT's volume weighted average price for the 10 days prior to April 21 and a 15.8% premium to the latest 30-day volume weighted average price," to put it in its own words. That's far below the average acquisition premium. To be fair, over this time frame, DHT's share price has been inflated because Frontline had been pursuing it compared to its undisturbed share price pre-Frontline interest. However, DHT has also been making money in the meantime.
Frontline's latest offer got a very cool reception
It really looks like the board is going over the checkboxes (emphasis mine):
Acknowledge the offer:
DHT Holdings, Inc. Announces Receipt of Unimproved Proposal from Frontline
Check.
State that it will be evaluated:
While the proposed exchange ratio of 0.8 reflects no improvement from the proposal our Board previously considered and unanimously rejected, our Board will carefully and thoroughly review the offer, taking into account the changes to DHT's fleet, market conditions and other developments that have occurred over the past two months.
Check.
By the way, it's great it is taking into account the changes to DHT’s average fleet age, but I can tell you right now; it improved slightly overall, while the age of its VLCCs went up slightly. I think it only mentions it because it looks good and the great state of its fleet will be emphasised in the eventual rejection.
Respond before the deadline:
I note that, as has been the case with their previous proposals, Frontline is requesting a reply in an unreasonably accelerated timeframe - in this case, less than 24 hours - which does not permit for an appropriate and diligent review by our Board. We will respond in due course.