BW LPG Limited announced a proposal to combine with Dorian LPG Ltd. in an all-stock transaction. Dorian shareholders would receive 2.05 BW LPG shares for each Dorian share.
Pursuant to the proposed transaction, BW LPG intends to dual-list on the New York Stock Exchange (“NYSE”) such that Dorian shareholders would receive at closing NYSE listed BW LPG shares, representing in the aggregate 45% of the combined company at the completion of the transaction. The proposal is supported by BW Group, which owns 14.2% of Dorian and approximately 45% of BW LPG.
BW LPG’s proposal to acquire Dorian represents a value of USD $7.86 per share of Dorian common stock based on BW LPG’s closing share price of NOK 31.42 on May 28, 20181. The total equity value of the transaction is approximately USD $441 million on a NAV to NAV basis and the total enterprise value is USD $1.1 billion, including the assumption of net debt. The proposal represents a premium of 13% to the closing Dorian share price on May 25, 2018 of USD $6.96 per share; a premium of 15% to the long-term historical exchange ratio of Dorian and BW LPG since Dorian’s IPO; and an EV to EBITDA multiple of 13.9x based on reported LTM EBITDA to December 31, 2017.
BW LPG Chief Executive Officer, Martin Ackermann, said, “Our proposal represents a unique and compelling opportunity to maximize value for both Dorian and BW LPG shareholders. Combining Dorian’s high quality fleet and operating platform with BW LPG’s vessels and expertise would create a larger combined fleet with better geographical coverage to drive value for our customers. Our proposal also provides Dorian shareholders with the opportunity to benefit from ownership of a larger company with enhanced trading liquidity that is better positioned for long-term growth and success.”
Andreas Sohmen-Pao, Chairman of BW LPG and BW Group, commented, “We think highly of Dorian’s fleet, management and operating principles. The proposed combination would advance our vision to be a great shipping company, creating long-term value for our customers and shareholders.”
Strategic and Financial Benefits
- Creates Industry-Leading Operator. Dorian brings a sizeable fleet of modern assets with an average vessel age of 3.9 years to BW LPG’s strong fleet that would provide enhanced capabilities to serve customers more efficiently. Together, Dorian and BW LPG would be a leading owner and operator of modern VLGCs, with 73 total vessels in its fleet including 70 VLGCs, and 3 LGCs, with an aggregate fleet capacity of 6.0 million cubic meters.
- Enhances Financial Flexibility. The combination of Dorian and BW LPG would result in a company with an enhanced credit profile and the financial flexibility to make strategic investments across market cycles and an enhanced growth profile compared to either company’s standalone position. The transaction would build upon BW LPG’s strong capital structure and track record of effective capital deployment through strategic acquisitions, investment in organic initiatives and returning capital to shareholders.
- Creates Value for Customers. The transaction would create a larger combined fleet with better geographical coverage to increase value for customers.
- Provides Free Cash Flow Accretion and Substantial Operational and Financial Synergies. The Company expects the transaction would generate significant free cash flow accretion to Dorian shareholders and substantial financial and operational synergies that are conservatively estimated at USD $15 million of annual run-rate savings. These synergies would drive meaningful value creation for shareholders of the combined company through higher pro forma earnings in excess of what the two companies could achieve as standalone entities.
The proposal was unanimously approved by the BW LPG Board of Directors and the Company is prepared to engage expeditiously in order to complete a transaction that would benefit both BW LPG and Dorian shareholders.
BW LPG’s proposal to acquire Dorian would require BW LPG shareholder approval by a simple majority of votes cast and has already received support for the proposed combination from BW LPG’s single largest shareholder, BW Group.