HAMILTON, BERMUDA, May 7, 2017 - DHT Holdings, Inc. (NYSE: DHT)
today announced that its Board of Directors has unanimously
rejected Frontline Ltd.'s (NYSE/OSE: FRO) April 25 proposal to
acquire all of the outstanding shares of common stock of DHT at a
ratio of 0.8 Frontline shares for each DHT share.
The Board's response is contained in a letter to Robert Hvide
Macleod, Principal Executive Officer of Frontline, which is set
forth below:
Dear Mr. Macleod:
We refer to your letter of April 25, 2017, proposing a business
combination between Frontline Ltd. and DHT Holdings, Inc., in which
our shareholders would receive 0.8 Frontline shares for each share
of DHT that they own.
This is, of course, the exact same proposal you made at the end
of February. We unanimously rejected that proposal,
determining it significantly undervalued the contribution that
DHT's business would make to a combined company.
But charter rates, asset values and other conditions are
changing constantly in our industry, and DHT's fleet has evolved
significantly since your February proposal. As a Board, we
will always remain open to exploring alternatives that, relative to
our current strategy, could provide superior value to our
shareholders, including a proposed takeover. Taking this all
into account, with the assistance of DHT management, our financial
adviser, Lazard, and our legal counsel, Cravath, Swaine & Moore
LLP, we thoroughly and carefully reviewed your proposal with an
open mind and fresh outlook.
Following that review, we have unanimously concluded that your
proposal continues to be wholly inadequate for DHT and its
shareholders.
We reject your proposal for a wide array of reasons-some perhaps
even more compelling to us now than they were this past
February. We would like to detail a few that should help you
come to appreciate, quite frankly, just how far off the mark you
are. Our hope is that-with a better understanding of the
total inadequacy of your offer-we can all turn our focus to areas
more productive for our respective businesses. For our part,
we have instructed our management team to focus on its full-time
job of running a great shipping company, for the benefit of our
shareholders. The bottom line is that Frontline's proposed
takeover of DHT is so woefully inadequate that we do not believe
further engagement will result in a fair offer for the DHT
franchise.
Our reasons are set forth below.
Contribution and Fleet Value
At the outset, know that we are incredibly pleased that our
management team has taken advantage of what we believe is-at the
moment-a buyer's market. We are optimistic about the
prospects of our expanded fleet, which is 50% larger after the deal
we struck with BW Group at the end of March. We believe that
value creation comes from additional growth at this stage in the
industry cycle. We have great faith in our management team
and its ability to execute on our strategic plan and maximize value
for our shareholders.
DHT has built a sizeable, high-quality fleet. Our
acquisition of BW's VLCC fleet is the latest example of our efforts
in this regard, and we believe our shareholders are more than
satisfied with the purchase price and other terms of that
transaction. We assume we can count Frontline among those
satisfied, as you testified under oath to the New York Supreme
Court in April that our transaction with BW was "not a bad
deal". We agree-in fact we believe it was a very good
deal. So it comes as no surprise to us that you still wish to
acquire our fleet.
But we did not build this company simply to hand it over to you
on the cheap.
We estimate that our fleet would contribute nearly 50% of the
aggregate net asset value (NAV) of a combined company. We
also estimate that the DHT fleet would provide in excess of 45% of
the combined company's 2018 EBITDA. You are offering our
shareholders only 40% of the combined company's equity. We
have consistently told you that the starting point for any
discussion is a fair and balanced analysis of fleet value.
Payment of a control premium would come on top of such a
fundamental and intrinsic analysis.
Another way to look at this is an accretion analysis or, in this
case, an accretion and dilution analysis. Your proposal is
massively accretive for Frontline's shareholders. We estimate
double-digit per share NAV accretion and projected 2018 EPS
accretion to Frontline shareholders. But a corresponding
analysis from the perspective of our shareholders shows that your
gain would be their loss: DHT shareholders would experience
an immediate dilution in the mid-teens in NAV per share as well as
a decline in projected 2018 EPS.
In March, our management team met with you several times to
discuss the value of the DHT fleet based on fundamental
contribution. We understand that those conversations did not
prove fruitful. You have refused to engage in a discussion
that starts with the proposition that both fleets should be valued
on a common basis. Your all-stock offer demands such a
starting point.
If we cannot begin a discussion with an honest and balanced
analysis of relative contribution, then we cannot begin to talk
about the contours of a possible transaction, including an
appropriate control premium on top of the contribution of DHT's
fleet to Frontline's asset value and earnings potential.
Fleet Composition
Additionally and importantly, a qualitative comparison of our
fleets bears out the conclusion that your proposal undervalues
DHT's contribution to a combined company. Our ships are
predominantly built at Hyundai and Daewoo in South Korea, two of
the most recognized shipyards for large tankers. We believe
that quality ships built at quality shipyards offer superior
long-term economics through competitive cost of vessel
maintenance.
In addition, our VLCCs have an average age of 6.5 years,
including four newbuildings under construction. The average
Frontline VLCC is relatively older.
Investment Opportunity
To stay competitive in a segment where young ships are highly
desirable, we expect that your upcoming capital expenditure
requirements will far outstrip our own. We have been prudent
in keeping our fleet youthful, while keeping leverage down and
maintaining our capital allocation policy. When it comes to
capital allocation, our strategy is clear and simple-retain a
prudent amount of cash flow to fund growth and operations and
return the remainder to our shareholders based on our well-defined
capital allocation policy, which our Co-CEOs have explained in
detail to our shareholders. We believe our shareholders are
supportive of this approach and deserve an opportunity to benefit
from investment in our discipline.
We have a prudent amount of leverage, and we have acted
opportunistically to make prepayments on our debt and repurchase
our convertible bonds during periods of strong cash flows. As
a result, you do not see us relying on excess leverage to sustain
dividends (to the contrary, we are sticking to our publicly stated,
well-defined capital allocation policy).
Even in cyclical downturns, we have avoided the need to
restructure. Together with management, we take full ownership
and responsibility for our balance sheet-we expect never to make
public scapegoats of our executives. We are not at the mercy
of a dominant shareholder to rescue us from insolvency or
restructuring. We have a plan designed to withstand the
inevitable cyclicality of our industry. We think this plan is
serving us well during trough periods with weaker earnings.
Separately, we note that Frontline is not a pure-play crude
company. DHT, particularly given the successful BW
acquisition, allows our investors to focus on that segment.
If our investors desire refined product exposure and a different
vessel mix that incorporates a large number of smaller-capacity
ships, Frontline and other platforms are available. Our near
exclusive concentration on VLCCs, we believe, is a valuable asset
for our public shareholders.
Governance and Transparency
DHT has built a reputation as a transparent company with strong
corporate governance practices. Our Board is strongly
independent under the New York Stock Exchange rules. As a
foreign company listed in the U.S., we are entitled to certain
exemptions from these independence requirements.
Nevertheless, we are set up so as not to differ significantly from
the standards followed by U.S. companies listed on the NYSE.
We truly believe this approach serves the best interests of our
shareholders.
Moreover, we believe that our business and capital structure is
designed so that our Board, management and shareholder interests
are all aligned towards a single approach to value-creation.
We do not have a dominant shareholder whose liquidity needs may be
in conflict with the interests of our public shareholders. We
do not have a dominant shareholder who has acquired a substantial
portion of our debt, creating a conflict between his interests as a
debtholder and as an equityholder.
This fact is particularly notable to us in the context of your
proposal. We note that, based on your filings with the SEC,
Frontline's current stake in DHT is actually, in part, held by a
separate entity owned by your dominant shareholder. Frontline
has no apparent control over this other entity. The idea that
DHT would come under the control of this shareholder-and be subject
to his competing interests-is anathema to our vision of shareholder
value-creation.
Further to that point, all of our business resides within the
DHT group. We do not have a dominant shareholder siphoning
off returns via an externally owned management company. When
we raise debt, we do so through reputable financial institutions
instead of obtaining credit facilities from related parties.
With all due respect, Frontline and its dominant shareholder
cannot make these same claims.
Gamesmanship
Lastly, we would be remiss in not bringing up the recent games
you have been playing in the courts. First you tried to block
our purchase of BW's VLCCs in New York. The New York justice not
only denied your request, but even repudiated the substance of your
argument, noting that you had failed to establish a probability of
success on the merits. Next, having been chastised in New
York, you sought another emergency order in yet another forum, and
failed again. Your tactics have been pure gamesmanship and
not designed to get to the core of your allegations, which are
wholly without merit.
***
Robert, we speak now for ourselves and on behalf of DHT
management. We have expended significant time and resources
on thoroughly considering, in good faith, your various proposals.
We have tried to find a common basis to commence real
negotiations. We have spoken several times, over the phone
and in person, about much of what we write about today. These
efforts have proved fruitless.
Meanwhile, the entire DHT team, including our Co-CEOs and CFO,
is working tirelessly to run our business and integrate the 11
VLCCs we acquired from BW.
Our goal today is to put our management team in the best
position possible to execute DHT's strategic plan. We believe
our plan is the best path towards enhancing value for DHT's
shareholders. We believe it is vastly superior to your
proposal and that the time has come to allow our management to
commit to it without distraction. You have claimed, multiple
times, that your proposal is final. We have taken you at your
word on this point. We believe that it is time for both
Frontline and DHT to turn our attentions to more productive
endeavors.
Sincerely,
The Board of DirectorsDHT Holdings, Inc.
About DHT Holdings, Inc. DHT is an independent crude oil
tanker company operating a fleet of crude oil tankers in the VLCC
and Aframax segments. We operate through our wholly owned
management companies in Oslo, Norway and Singapore. For further
information: www.dhtankers.com.
Forward Looking Statements
This press release may contain assumptions, expectations,
projections, intentions and beliefs about future events. When
used in this document, words such as "believe," "intend,"
"anticipate," "estimate," "project," "forecast," "plan,"
"potential," "will," "may," "should" and "expect" and similar
expressions are intended to identify forward-looking statements but
are not the exclusive means of identifying such statements.
These statements reflect DHT's current views with respect to future
events and are based on assumptions and subject to risks and
uncertainties. Given these uncertainties, you should not
place undue reliance on these forward-looking statements.
These forward-looking statements represent DHT's estimates and
assumptions only as of the date of this press release and are not
intended to give any assurance as to future results.
Investing in DHT's securities involves risk, and investors should
be able to bear the loss of their investment. For a detailed
discussion of the risk factors that might cause future results to
differ, please refer to DHT's Annual Report on Form 20-F, filed
with the SEC on March 23, 2017.
DHT undertakes no obligation to publicly update or revise any
forward-looking statements contained in this press release, whether
as a result of new information, future events or otherwise, except
as required by law. In light of these risks, uncertainties
and assumptions, the forward-looking events discussed in this press
release might not occur, and DHT's actual results could differ
materially from those anticipated in these forward-looking
statements.
Media Contacts Svein Moxnes Harfjeld, Co-CEO: +47
23115080 Trygve P. Munthe, Co-CEO: +47 23115080
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