FRO - Response from Frontline to the letter from the Board of DHT Holdings Inc. dated 7 May, 2017.
(Thomson Reuters ONE) -
Frontline Ltd. (NYSE/OSE: FRO) today announced that Frontline has sent a
response to the Board of DHT Holdings Inc. to the letter received from the Board
of DHT Holdings Inc. dated May 7, 2017.
Please find below a copy of the reponse letter sent by Frontline to the DHT
Board:
Dear Mr. Lind,
We write in response to the 7 May 2017 letter from the Board of Directors
("Board") of DHT Holdings, Inc. ("DHT") regarding our 25 April 2017 letter
proposing a business combination ("offer") between DHT and Frontline Ltd.
("Frontline").
Although your letter claims that the DHT Board is "open to exploring
alternatives" that could enhance DHT shareholder value, it is clear from your
response and prior conduct that this is untrue. You have repeatedly refused to
allow DHT shareholders a realistic opportunity to consider our offer, and that,
combined with your use of legal mechanisms to entrench the Board and management
of DHT, can in our view only harm shareholder value and confirm the market's
persistent view that DHT's share price should be discounted relative to NAV.
Your criticism of our offer is self-serving and misleading, particularly in
light of the fact that DHT itself has deemed the offer "non-coercive". You focus
solely on what percentages DHT would contribute to the combined company in terms
of NAV, EBITDA and EPS, and fail to give due consideration to, first, the
immediate value creation that our offer of 0.8 Frontline shares per DHT share
would provide to your shareholders and, second, the increased upside potential
of being invested in Frontline shares to which the market has consistently
ascribed a premium to NAV, as opposed to DHT shares to which the market has
consistently ascribed a discount to NAV.
You argue that there is nothing stopping Frontline from making a formal tender
offer directly to your shareholders. That is misleading, because Frontline will
not be able to close any tender offer it makes without triggering the punitive
dilution provisions of the Shareholder Rights Plan (i.e., the "poison pill") you
implemented precisely to prevent such an offer by Frontline. In addition, you
largely exempted BW Group Limited ("BW Group") from these provisions of the
poison pill and granted BW Group a matching right which acts as a significant
deterrent not just in relation to Frontline but also to other potential bidders.
By your actions, you have provided BW Group with a pathway to seize control of
DHT whilst simultaneously preventing Frontline (or any other bidder) from doing
so. In particular, you have permitted BW Group to increase its holdings to 45%
of DHT (while all other active shareholders are held under 10%). You have also
given BW Group the ability to veto competing offers, in addition to its
exclusive ability to make an offer directly to shareholders, as Frontline has
been blocked from doing by the poison pill. The net effect of your actions
(amongst other entrenchment mechanisms you have erected such as a staggered
board of directors) has been to deprive your shareholders of any opportunity to
properly consider Frontline's offer (an offer DHT has already determined is
"non-coercive").
With respect to the other criticisms you raise in your letter and other
responses, as you continue to refuse to engage in any meaningful good faith
negotiations, we respond only briefly as follows:
* Earlier this year (at the time we made our initial offer to DHT), management
of DHT first stated that the NAV of the DHT fleet was $5.70 per share.
During your most recent earnings call you declared that you have now
"established" your NAV to be $5.37 by virtue of your vessel acquisition from
BW. The fact that your share price trades at a significant discount to your
newly "established" NAV has two effects. First, it discredits your argument
that NAV should be used as a starting point for a business combination. In
fact, the starting point should be your share price. Second, and more
importantly, it raises serious questions about why the market has
consistently failed to ascribe any premium to DHT's NAV but rather has
discounted DHT's share price relative to its NAV. We attribute that to the
corporate governance, actions and record of DHT's Board and its management.
* You state that we are at the mercy of a "dominant shareholder" whose
liquidity needs may be in conflict with the interests of your shareholders.
In reality, we believe the involvement of Hemen Holdings Ltd., Frontline's
largest shareholder, is one of the key reasons why the market has
consistently ascribed a premium to Frontline's NAV.
* Your suggestion that Frontline's largest shareholder "siphons" returns from
Frontline "via an externally owned management company" is false. Frontline
Ltd. owns 100% of the shares in Frontline Management AS, its management
company.
* The compensation paid to senior management of Frontline Management AS is a
fraction of that paid to the senior management of DHT. At Frontline,
compensation is strictly aligned with our ability to pay dividends and the
appreciation of our shares.
* It is difficult to comprehend why DHT requires the services of co-CEOs, with
a compensation package that significantly exceeds that of any comparable
tanker company. We cannot think of a single shipping company that has two
CEOs, and query whether DHT's Board has properly considered the costs
duplication, corporate governance complexities and inefficiencies of that
arrangement. Those costs come directly out of the pockets of DHT's
shareholders.
Shareholders' total return is based on share price appreciation and dividends
received. DHT's share price has languished at a massive discount to the
liquidation value of its fleet for years. Every day the stock market votes on
the competence of management and their ability to provide results for
shareholders in the future. Every day the market has expressed a vote of "no
confidence" in the DHT Board and its management. Our proposal to combine with
DHT did not include the retention of either the DHT Board or senior management
and, in our view, is one of the key reasons for the imposition of the multiple
entrenchment measures you have put in place.
Every action the DHT Board has taken, from failing to negotiate with Frontline
in good faith, hiring high priced advisors to entrench themselves and management
and diluting shareholder value with the acquisition of more vessels, has been
colored by self-interest.
DHT's press release on 28(th) February includes the following statement:
'.the revised Frontline proposal continues to be wholly inadequate and not in
the best interests of DHT or its shareholders.' (Our underlining)
In fact, DHT's Board and management have in our view confused their own
interests with those of the company and its shareholders. It is now clear to us
that DHT's Board and management team prefer to maintain their cozy scheme and it
should be clear to all shareholders that the interests of DHT's Board and
management and the interests of its shareholders diverge. Simply put, the
ability of DHT's shareholders to trust that DHT's Board and management will act
in the best interests of the company and its shareholders has been completely
undermined.
You also incorrectly state that we have claimed multiple times that our proposal
is final and that you have taken us at our word on this point. In fact, as
reflected in our most recent letter, we remain willing to discuss our offer and
negotiate with you in good faith, provided that the DHT Board meets its
fiduciary duties by agreeing to suspend the Shareholder Rights Plan and Investor
Rights Agreement, which prevent Frontline (and any other bidder) from competing
with BW Group's efforts to seize control of DHT.
On behalf of Frontline and other DHT shareholders, we again request that the DHT
Board commence good faith negotiations with Frontline on its offer, or redeem
the poison pill and permit Frontline to take its offer directly to DHT's
shareholders.
Yours sincerely,
Robert Hvide Macleod
Principal Executive Officer
Frontline Limited
Additional Information
This communication does not constitute an offer to sell or the solicitation of
an offer to buy any securities or a solicitation of any vote or approval. This
communication relates to a proposed business combination transaction with DHT
proposed by Frontline, which may become the subject of a registration statement
filed with the Securities and Exchange Commission (the "SEC"). This material is
not a substitute for the prospectus and/or proxy statement Frontline would file
with the SEC regarding the proposed transaction if such a negotiated transaction
with DHT is reached or for any other document which Frontline may file with the
SEC or send to DHT or Frontline stockholders in connection with the proposed
transaction. INVESTORS AND SECURITY HOLDERS OF Frontline AND DHT ARE URGED TO
READ ANY SUCH DOCUMENTS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY IF AND
WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT
THE PROPOSED TRANSACTION. Such documents would be available free of charge
through the web site maintained by the SEC at www.sec.gov
Forward-Looking Statements
Matters discussed in this communication may constitute forward-looking
statements. The Private Securities Litigation Reform Act of 1995 provides safe
harbor protections for forward-looking statements, which include statements
concerning plans, objectives, goals, strategies, future events or performance,
and underlying assumptions and other statements, which are other than statements
of historical facts. Words such as "believe", "anticipate", "intends",
"estimate", "forecast", "project", "plan", "potential", "may", "should",
"expect", "pending" and similar expressions identify forward-looking statements.
The forward-looking statements in this communication are based upon various
assumptions. Although we believe that these assumptions were reasonable when
made, because these assumptions are inherently subject to significant
uncertainties and contingencies which are difficult or impossible to predict and
are beyond our control, we cannot assure you that we will achieve or accomplish
these expectations, beliefs or projections. The information set forth herein
speaks only as of the date hereof, and we disclaim any intention or obligation
to update any forward-looking statements as a result of developments occurring
after the date of this communication. In addition to these important factors and
matters discussed elsewhere herein, important factors that, in our view, could
cause actual results to differ materially from those discussed in the forward-
looking statements include DHT's failure to accept Frontline's proposal and
enter into a definitive agreement to effect the transaction, fluctuations in the
value of Frontline common shares issued in connection with the proposed
acquisition, the strength of world economies, fluctuations in currencies and
interest rates, general market conditions, including fluctuations in charter
hire rates and vessel values, changes in demand in the dry bulk market, changes
in our operating expenses, including bunker prices, drydocking and insurance
costs, the market for our vessels, availability of financing and refinancing,
changes in governmental rules and regulations or actions taken by regulatory
authorities, potential liability from pending or future litigation, general
domestic and international political conditions, potential disruption of
shipping routes due to accidents, political events or acts by terrorists, and
other important factors described from time to time in the reports filed by the
Frontline with the Securities and Exchange Commission.
This information is subject to the disclosure requirements pursuant to section
5 -12 of the Norwegian Securities Trading Act.
Contacts:
Robert Hvide Macleod: Chief Executive Officer, Frontline Management AS
+47 23 11 40 84
Inger M. Klemp: Chief Financial Officer, Frontline Management AS
+47 23 11 40 76
This announcement is distributed by Nasdaq Corporate Solutions on behalf of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Frontline Ltd. via GlobeNewswire
Unternehmensinformation / Kurzprofil:
Datum: 15.05.2017 - 15:11 Uhr
Sprache: Deutsch
News-ID 543874
Anzahl Zeichen: 14015
contact information:
Town:
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Kategorie:
Business News
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"FRO - Response from Frontline to the letter from the Board of DHT Holdings Inc. dated 7 May, 2017."
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