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Frontline to DHT: Spit out the poison pills and listen

Written by Nick Blenkey
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APRIL 26, 2017 — John Fredriksen controlled Frontline Ltd. (NYSE/OSE: FRO) reports that it has now made another offer for DHT Holdings, Inc. (NYSE: DHT) and DHT has reported that it has received it.

In its letter, Frontline seems particularly irked by “poison pill” defenses adopted by DHT in its rejection of the initial Frontline offer and its subsequent deal to acquire BW Group’s VLCC fleet.

DHT says that the proposal from Frontline Ltd. is to acquire all of the outstanding shares of common stock of DHT in a stock-for-stock transaction. Frontline has proposed a ratio of 0.8 Frontline shares for each share of DHT, which is the same exchange ratio contained in Frontline’s previous proposal of February 24 of this year.

Frontline delivered its proposal letter to Erik Lind, Chairman of the DHT Board, shortly after 4:30 p.m. New York City time, on April 25, and requested a response to the letter by 12:00 p.m., New York City time, on April 26.

“Consistent with its fiduciary duties, DHT’s Board will evaluate the proposal from Frontline,” said Mr. Lind. “While the proposed exchange ratio of 0.8 reflects no improvement from the proposal our Board previously considered and unanimously rejected, our Board will carefully and thoroughly review the offer, taking into account the changes to DHT’s fleet, market conditions and other developments that have occurred over the past two months. I note that, as has been the case with their previous proposals, Frontline is requesting a reply in an unreasonably accelerated timeframe – in this case, less than 24 hours – which does not permit for an appropriate and diligent review by our Board. We will respond in due course.”

Here’s the text of the letter that Frontline sent the DHT Board on April 25, 2017

DHT Management AS Haakon VIIs GT.1, 7th floor POB 2039 Vika, 0125 Oslo, Norway

For the attention of: Erik A. Lind, Chairman of the Board of Directors

Oslo, 25 April 2017

Terms for the proposed combination of Frontline, Ltd. and DHT Holdings, Inc.

Dear Mr Lind,

We write to ask the Board of Directors of DHT Holdings, Inc. (“DHT”) to consider a proposed business combination (“offer”) with Frontline Ltd. (“FRO” or “Frontline”), which may be effected by way of a one-step merger, tender offer or other appropriate structure.

The offer includes the ships delivered and to be delivered by BW Group Limited (“BW”) to DHT under the Vessel Acquisition Agreement (“VAA”) and takes into account shares of common and preferred stock of DHT issued and to be issued to BW thereunder.

The offer would be effected at an exchange ratio of 0.8 Frontline shares for each DHT common share.

The terms of the offer have been approved by Frontline’s Board of Directors, are not subject to any financing condition and are conditioned only on fulfilment (or waiver by Frontline) of the following conditions: (a) the negotiation and execution of mutually satisfactory transaction documents between Frontline, DHT and, if applicable, BW; (b) approval from the requisite majority of DHT stockholders of any one-step merger with Frontline or Frontline receiving acceptances from stockholders which, together with its and its affiliates’ holdings, represent not less than 50.01% of the outstanding voting stock of DHT (including both common and preferred stock voting as a single class, as well as shares to be issued pursuant to the VAA); and (c) termination of, or the grant by a court of competent jurisdiction of permanent injunction(s) in respect of: (i) the DHT Rights Agreement dated as of January 29, 2017; and (ii) the Investor Rights Agreement (“IRA”) with BW and, in particular, those provisions of the IRA which prevent or preclude Frontline from consummating the offer if approved or accepted as contemplated by (b) above (collectively, the “poison pill arrangements”).

When it is commenced, the offer to all DHT’s shareholders will remain open for at least 45 days.

The poison pill arrangements, together with the DHT Board of Directors’ decision not to permit DHT shareholders to consider and vote on any of our prior offer proposals, contravene the duties DHT’s Board owes to all its shareholders. Moreover, the poison pill arrangements threaten to inflict irreparable harm on DHT, as well as Frontline, by effectively blocking any entity besides BW from engaging in a business combination with DHT.

We therefore demand that you immediately halt all efforts to enforce, give effect to or permit, the poison pill arrangements, and that you permit DHT stockholders the opportunity to consider and vote on the offer. Please confirm by 12 noon, New York time, tomorrow (April 26, 2017) that you will immediately halt all efforts to enforce, give effect to or permit, the poison pill arrangements and will commence negotiations with Frontline on mutually satisfactory transaction documents.

The proposal outlined in this letter is based on publicly available information.

Yours sincerely,

Robert Hvide Macleod

Principal Executive Officer

Frontline Ltd.

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