DHT deal with BW ‘not defensive’

Lawyers say company’s $538m acquisition not a reaction to Fredriksen breathing down its neck.

DHT Holdings’ $538m acquisition of 11 VLCCs from the BW Group while it was still under a takeover pursuit by shipowner John Fredriksen was “not a defensive measure,” a US court was told this week.

A memorandum filed by DHT lawyers asserts that the 23 March agreement was not a maneuver to shake the Norwegian billionaire off the company’s back, but rather fulfillment of an established business plan.

“That strategy (acquiring ships) was put in place by DHT’s board and management well before (Fredriksen’s) Frontline ever made a takeover offer,” according to Kevin Orsini and Rory Leraris, attorneys in the Manhattan firm of Cravath, Swaine & Moore.

“The (buy) was not a response to the Frontline offer in any way. The (deal) is an asset acquisition. It does not effect a change in control. It was not a defensive measure.”

That may come as a surprise to many tanker-market observers, who concluded at the time that DHT had pulled off a clever tactic in blocking Frontline’s advances with a deal that makes BW its largest shareholder at 33.5%.

But the DHT lawyers sought to blunt Frontline’s argument that the BW transaction put DHT “in play,” or represented another blocking mechanism after DHT earlier had added “poison pill” provisions to its bylaws to block a hostile takeover.

BW does not get majority control of DHT, lawyers noted, nor is it even entitled to make an offer until after an 18-month standstill period expires, or until its holding falls below 25%.

“The (BW buy) was part of a strategy designed well before Frontline approached DHT, and the timing of the asset acquisition was unrelated to Frontline’s takeover offer,” the lawyers assert.

“Any defensive effects from the issuance of new shares to purchase the assets were ‘collateral at best.’”

DHT was able to ward off Frontline’s attempts to win a temporary restraining order against the BW acquisition going forward after New York Supreme Court Judge Barry Ostrager rejected the request on jurisdictional and other grounds.

Frontline’s lawsuit seeking to place its own offer before DHT shareholders remains in place for now pending a 27 June hearing.