Scorpio to acquire Navig8 products tankers through merger

Written by Nick Blenkey
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MAY 24, 2017 — Scorpio Tankers Inc. (NYSE:STNG) reports that it has entered into definitive agreements to merge with Navig8 Product Tankers Inc. (NOTC: EIGHT) and acquire its 27 operating product tankers.

Scorpio is set to acquire four LR1 tankers prior to the closing of the merger and the remaining 23 tankers upon the closing of the Merger in exchange for the issuance of 55 million shares of Scorpio common stock to the Navig8 shareholders.

In connection with the LR1 Vessel Acquisitions, Scorpio will pay cash consideration of $42.2 million, which is net of assumed debt. This cash is expected to remain with Navig8 through closing and will form part of the balance sheet of the combined company, subject to the terms and conditions of the merger agreement.

Scorpio also announced today the launch of an underwritten public offering of up to $200.0 million of its shares of common stock. The net proceeds of the offering are expected to be used to provide cash to further strengthen Scorpio’s balance sheet and enhance liquidity, for the payment of costs related to the Merger, to fund the purchase price of the LR1 VESSEL ACQUISITIons, and the remainder, if any, for general corporate purposes.

Scorpio says that through the merger it is acquiring an operating fleet of 27 eco-design product tankers, comprised of 15 LR2s and 12 LR1s with a weighted average age of 0.9 years and an aggregate carrying capacity of approximately 2.6 million dwt.

After the merger, Scorpio’s operating fleet will consist of 105 owned or finance leased tankers (38 LR2 tankers, 12 LR1 tankers, 41 MR tankers and 14 Handymax tankers) with a weighted average age of approximately 1.9 years, and 19 time or bareboat chartered-in tankers (one LR2 tanker, nine MR tankers and nine Handymax tankers).

Scorpio also has contracts for the construction of six newbuilding MR product tankers that are expected to be delivered throughout the remainder of 2017 and first quarter of 2018.

Scorpio has also entered into an agreement to sell two MR product tankers, which is expected to close in June 2017.

A majority of holders of Navig8’s outstanding common shares have agreed to vote their shares in favor of the merger, subject to certain exceptions.

The availability, terms, and quality of financing will provide significant advantages compared to its peers.

Based on Scorpio’s closing price on May 22, 2017, the consideration reflects a total equity value for Navig8 of approximately $228.8 million and a total enterprise value of approximately $1.1 billion, including the assumption of debt.

VesselsValue comments “Navig8 Product Tankers owned 10 of the vessels involved in this deal, a mix of LR1 and LR2 tankers. They are worth a total of $362.52 million today. The other 17 involved in the deal are chartered in on bare boat from CSSC Shipping, China Merchants Bank, Bank of Communications and Ocean Yield ASA. These 17 vessels have a market value today of $661.64 million. Scorpio is going to take over the charter contract for these vessels, with the possibility of buying them once the charter is over.”

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