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Why TNK Thinks Merger with TIL Is of Strategic Importance

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Merger

In the third quarter conference call, Teekay Tankers (TNK) gave updates on TNK’s merger with Tanker Investments (TIL). Teekay Tankers has received support from its four largest shareholders. Also, two independent proxy advisory firms, ISS and Glass Lewis, recommend that the company’s shareholders should vote for the merger. We’ll now see why Teekay Tankers considers this merger to be important.

  • The merger is consistent with Teekay Tankers’ long-term strategy of increasing shareholder value.
  • The combination of TNK and TIL will create the world’s largest publicly listed mid-size tanker company with a fleet of 58 owned tankers operating in key global markets. TIL’s fleet consists of ten Suezmax tankers, six Aframax tankers, and two LR2 (Long Range 2) product tankers.
  • The addition of TIL’s 18 vessels with an average age of ~7 years will reduce Teekay Tankers’ average fleet age from ten years to nine years.
  • Teekay Tankers expects this transaction to be immediately accretive to earnings per share based on 2016 proforma results.
  • TNK is acquiring TIL when tanker prices are at historic lows.
  • The merger is expected to strengthen TNK’s balance sheet, reducing the financial leverage and increasing liquidity by approximately ~$90 million to $190 million.
  • TNK expects the merger to create significant value for Teekay Tankers’ shareholders.
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This merger won’t be completed without the approval of at least 50% of all outstanding shares. The company has strongly encouraged those who own Teekay Tankers’ Class A common shares to vote for the merger. In the next part of the series, we’ll see what analysts recommend for Teekay Tankers and its peers Euronav (EURN), Gener8 Maritime Partners (GNRT), Frontline (FRO), and Nordic American Tankers (NAT).

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