Tag Archives: tanker investments

Teekay Tankers (SELL, USD 0.7): Challenging liquidity position ahead of the cyclical trough. TP revised down from 1.2

The company recently announced the acquisition of Tanker Investments in an all-share deal on a NAV-for-NAV basis, leaving TNK’s old shareholders with ~68% of the NewCo. The two companies form a natural fit as TNK owns 11% of TIL and already provides technical and commercial management of TIL’s fleet. We do minor downwards adjustments to our fundamental forecast for oil tankers, and believe any seasonal increase in share prices in 2H17 will be temporary. We reiterate our SELL recommendation and downgrade our target price to USD 0.7/sh (from 1.2)

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Tanker consolidation continues with TNK acquiring TIL

Teekay Tankers today announced the acquisition of Tanker Investments in an all-share deal which values TIL at a 21% premium to last close and which reflects a NAV-for-NAV transaction on our estimates. TIL’s shareholder will end up with 38% of NewCo vs a NAV contribution of ~39% and TNK’s shareholder with the remaining 62% with a NAV contribution of ~61%. We view the transaction as positive for both companies as TIL releases some of the massive discount to NAV which has been inherent in the share price since inception in 2014, and TNK which strengthens the balance sheet and alleviates some of our concerns around the liquidity situation through the trough. The two companies also forms a natural fit as TNK owns 11.3% of TIL and already provides technical and commercial management of TIL’s fleet. We reiterate our SELL recommendation on TNK but raise our target price to USD 1.2/sh (USD 1.1) to reflect the decreased liquidity challenge.

Deal highlights:

  • “Each TIL common share will receive 3.30 Teekay Tankers Class A common shares
    representing a 21% premium to TIL’s closing share price on May 31, 2017, and a 29% premium based on TNK’s 30-day volume weighted average price (VWAP)”
  • “Creates the world’s largest publicly-traded mid-sized conventional tanker company
    with combined total assets of $2.4 billion”
  • “Upon completion of the merger, Tanker Investments’ shareholders (other than Teekay Tankers and Teekay Corporation) will own approximately 30% of the combined entity, consisting of 62 conventional tankers, including three in-chartered vessels (30 Suezmax tankers, 22 Aframax tankers, 9 LR2 Product tankers and one 50 percent-owned VLCC tanker).”

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TIL-NO: Initiation (SELL, TP 33)

Originally set up as a well-timed asset play in early 2014, the company managed to divest a small portion of its fleet before the cycle turned to recession in 2016. Thus, the focus has shifted to operations ahead of the next cyclical upturn, which we expect to materialize from 2019E. With further fall in asset prices ahead and the consistent share illiquidity factored in, we initiate coverage of Tanker Investments with a SELL recommendation and target price of NOK 33 (-25%).

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