BW LPG Buys 12 VLGCs from Avance Gas in $1.05 Billion Deal
BW LPG on Thursday announced it has agreed to acquire 12 very large gas carriers (VLGC) from Avance Gas in a cash and stock deal valued at more than $1 billion.
The deal will see Avance Gas sell off the entirety of its VLGC fleet, including four 91,000-cubic-meter (cbm) vessels built in South Korea in 2022 and 2023 and eight 83,000-cbm vessels built in China in 2015, and grows BW LPG's owned and operated VLGC fleet from from 41 to 53.
According to BW LPG, this fleet expansion comes at an opportune time with VLGC newbuild deliveries abating and continued growth in global LPG export volumes.
Andreas Sohmen-Pao, chairman of the board of BW LPG, said, “This strategic transaction supports BW LPG’s ambition to serve our customers with enhanced shipping and product delivery options in the fast-growing LPG space. The addition of these 12 vessels will result in an expanded fleet, greater flexibility, and are expected to be accretive to earnings based on our market view. They will also support our product trading and terminal activities.”
Kristian Sørensen, CEO of BW LPG, said, “Today’s transaction marks a major milestone in BW LPG’s history and reflects our ability to execute large fleet acquisitions by maintaining a robust balance sheet and using the BW LPG share as an attractive currency. The acquired vessels will further enhance our commercial scale and increase our operational leverage in a market we expect to be strong in the coming years and as such solidify earnings and dividend potential.”
BW LPG said it will fund the transaction through the issuance of 19.282 million new shares to Avance Gas and a cash consideration of $585.4 million, of which $368 million is to fund the repayment of the existing bank debt of 10 vessels. Remaining debt in the amount of $132 million pertaining to two sale-leaseback vessels is to be novated. BW LPG said $235.4 million of the cash consideration will be paid from its available cash resources and $350 million will be financed by a shareholder loan from its largest shareholder, BW Group.
Following the issuance of the total share consideration, Avance Gas will become a 12.77% shareholder in BW LPG. Avance Gas will have a 40 calendar day lock-up period in respect of the consideration shares received following delivery of each vessel.
BW LPG is expected to increase its net leverage ratio from 7% in Q1 2024 to a range of 30-35%, maintaining a robust balance sheet to support continued shareholder distributions.
