Teekay Tankers announces merger agreement with Tanker Investments Ltd.

By Finance

Highlights

  • Share-for-share merger agreement signed with Tanker Investments Ltd., which owns 18 mid-size conventional tankers:
    – Creates the world’s largest publicly-listed mid-sized conventional tanker company
    –Acquisition of over $500 million of modern tankers, resulting in combined total assets of $2.4 billion(1)
    –Expected to be immediately accretive to earnings per share
    –Reduces financial leverage and increases total pro forma liquidity by approximately $117 million(2)
    –Lowers the average age of fleet by one year
  • Teekay Tankers separately acquired the remaining 50 percent interest in Teekay Corporation’s commercial and technical management operations (Teekay Operations) for approximately $27 million, consolidating all commercial and technical management operations under Teekay Tankers.
Teekay Tankers announces merger agreement with Tanker Investments Ltd.
Image courtesy of Teekay

Teekay Tankers Ltd. (Teekay Tankers or the Company) (NYSE:TNK) Wednesday (May31,2017) announced that it has agreed to acquire all the remaining issued and outstanding shares of Tanker Investments Ltd. (TIL) (OSLO:TIL), in a share-for-share merger at an exchange ratio of 3.30 Teekay Tankers Class A common shares for each TIL common share (Teekay Tankers currently owns 3.4 million common shares, or 11.3 percent, of TIL). TIL’s fleet consists of 10 Suezmax tankers, 6 Aframax tankers and 2 LR2 Product tankers with an average age of 7.3 years. Following the merger, Teekay Tankers’ fleet will consist of 62 conventional tankers, including 3 in-chartered conventional tankers (30 Suezmax tankers, 22 Aframax tankers, 9 LR2 Product tankers and one 50 percent-owned VLCC).

As part of the transaction, Teekay Tankers will assume approximately $350 million of TIL’s long-term debt, which includes two revolving credit facilities and a term loan, and on a pro forma basis as of March 31, 2017, the transaction adds approximately $117 million(1) of liquidity to Teekay Tankers. The transaction is expected to be immediately accretive to Teekay Tankers’ earnings per share and, since Teekay Operations already provides the commercial and technical management of TIL’s vessels, the Company expects a seamless integration of these two homogenous fleets.

“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 Chief Executive Officer.

Mr. Mackay continued, “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 finalized, 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.”

The TIL merger has been approved by the Board of Directors of both Teekay Tankers and TIL, including approval from a Special Committee of the Board of Directors of TIL made up of independent TIL board members. The transaction is subject to customary closing conditions, approval by TIL shareholders of the merger, and approval by Teekay Tankers’ shareholders of an increase in the authorized number of Teekay Tankers’ Class A common shares, to permit the issuance of Class A common shares as merger consideration. The Company expects to close the merger in the third quarter of 2017.

The acquisition of the remaining 50 percent ownership in Teekay Operations, from Teekay Corporation, for approximately $27 million, has brought all commercial and technical management operations directly under Teekay Tankers. As compensation, Teekay Tankers has issued to Teekay Corporation approximately 13.8 million Class B common shares. Teekay Operations commercially manages an aggregate fleet of approximately 90 vessels and provides technical management for approximately 60 vessels. The Teekay Operations transaction was approved by the Board of Directors and Conflicts Committee of Teekay Tankers.

TIL Fleet Summary:

 Vessel   Class   Year Built  Time Charter-Out Rates ($ per day)  Expiry
 Hovden Spirit  LR2  2012    
 Trysil Spirit  LR2  2012    
 Peak Spirit  Aframax  2011    
 Whistler Spirit  Aframax  2010    
 Blackcomb Spirit  Aframax  2010    
 Tarbet Spirit  Aframax  2009  $17,000  February 2018
 Emerald Spirit  Aframax  2009  $17,500  October 2017
 Garibaldi Spirit  Aframax  2009    
 Copper Spirit  Suezmax  2010    
 Tahoe Spirit  Suezmax  2010  $19,750  April 2018
 Tianlong Spirit  Suezmax  2009    
 Jiaolong Spirit  Suezmax  2009    
 Shenlong Spirit  Suezmax  2009  $19,750  March 2018
 Dilong Spirit  Suezmax  2009    
 Baker Spirit  Suezmax  2009    
 Cascade Spirit  Suezmax  2009    
 Aspen Spirit  Suezmax  2009    
 Vail Spirit  Suezmax  2009    

About Teekay Tankers

Teekay Tankers currently owns a fleet of 40 double-hull tankers, including 20 Suezmax tankers, 13 Aframax tankers, and seven Long Range 2 (LR2) product tankers, and has three contracted time charter-in vessels. Teekay Tankers’ vessels are employed through a mix of short- or medium-term fixed rate time charter contracts and spot tanker market trading. The Company also owns a Very Large Crude Carrier (VLCC) through a 50 percent-owned joint venture. In addition, Teekay Tankers owns a ship-to-ship transfer business. Teekay Tankers was formed in December 2007 by Teekay Corporation as part of its strategy to expand its conventional oil tanker business.

Teekay Tankers’ common stock trades on the New York Stock Exchange under the symbol “TNK.”

About Tanker Investments Ltd.

Tanker Investments Ltd. is a specialized investment company focused on the tanker market. Tanker Investments Ltd. was formed in January 2014 to opportunistically purchase, operate and sell modern secondhand tankers to benefit from cyclical fluctuations in the tanker market. Tanker Investments’ fleet consists of 18 vessels.

Tanker Investments’ common stock trades on the Oslo Stock Exchange under the symbol “TIL”.

Source: Teekay