John Fredriksen drops legal bombshell in DHT takeover twist

Frontline takes legal action to blow up VLCC deal between two owners and force shareholders to consider its own takeover pitch.

John Fredriksen’s Frontline is suing takeover target DHT Holdings and seeking to block its proposed $538m acquisition of the BW Group VLCC fleet so that its own offer can see a vote of DHT shareholders.

Frontline filed a 34-page complaint in New York Supreme Court Tuesday, on the same day it pitched a third offer to win control of New York-listed DHT, which is led by co-chief executives Svein Moxnes Harfjeld and Trygve Munthe.

The surprise action makes clear that assumptions Fredriksen would now retreat from his DHT pursuit and seek other acquisition targets were at best premature.

Frontline says in the legal brief that the latest offer would give DHT shareholders a 16.7% premium over the prevailing share price, but claims DHT’s board has once again blocked holders from even considering it.

ae4f57580a05ef7dfd3c4b4eb65397a8 DHT Holdings has rejected two takeover offers from Frontline  Photo: DHT Holdings

DHT management has dismissed as “inadequate” two earlier offers from Frontline, currently the company’s largest shareholder.

“The board has erected a series of defenses that effectively preclude DHT’s shareholders from ever considering Frontline’s proposed offer,” Frontline charges through New York law firm Quinn Emanuel Urquhart & Sullivan.

“At the same time, DHT has entered into a highly irregular and improper transaction with (BW) whereby (BW) will become the company’s dominant shareholder.

“Frontline’s stake in the company will be significantly diluted, and BW Group will be given an unfair advantage in acquiring the company — all to the detriment of the company’s shareholders.

“Frontline, on behalf of itself and all DHT shareholders, brings the instant complaint to remedy these injustices, which are harming DHT shareholders.”

Seeking to derail deal

The Fredriksen company is asking a New York State judge to issue a temporary restraining order blocking DHT and BW from going through a deal to acquire the latter’s 11 VLCCs in return for a 33.5% stake that would make BW the largest shareholder.

The deal would create the world’s third-largest independent owner of VLCCs with 30, Harfjeld told TradeWinds last month.

13857a66f45eb15ae1f3ad1f10a641e2 DHT Holdings co-chief executives Trygve Munthe (left) and Svein Moxnes Harfjeld.  Photo: DHT Holdings

DHT and BW announced the transaction 23 March, with DHT having already rejected two takeover offers from Fredriksen and imposing “poison pill” language in company bylaws that caps Frontline’s ability to accumulate more shares.

The only just rationale for such measures would be preventing a “coercive” offer, Frontline states in the complaint.

However, in granting BW an exception from the same restrictions, DHT defines a “non-coercive” offer as one that grants at least a 15% premium to its existing share price, and requires that any stock consideration offered for DHT shares come from a company with a larger public shares float.

Third time lucky? 

Frontline meets both tests with this week’s offer, the complaint states. The Fredriksen company does have a larger float, and the offer premium is 16.7% over DHT’s stock price.

This week’s offer is for 0.8 Frontline shares in exchange for each DHT share, the complaint states.

Since the offer is “non-coercive,” Frontline reasons, the poison pill serves no purpose other than “allowing the (DHT) board to entrench themselves and preserve their lucrative positions within the company".

The lawsuit names as defendants DHT and BW plus DHT’s board of directors - but not executives of either company.

TradeWinds reported 27 March that Frontline had cut its stake in DHT to 14.3% from 16.4% according to latest filings with the US Securities and Exchange Commission.

Frontline says in the complaint that it now holds 13.4% and would be diluted to an 8.9% stake if the BW deal goes through.

For more coverage of Frontline's battle to take over DHT Holdings, click here.