Oslo-listed very large gas carriers (VLGCs) specialist Avance Gas has sealed a deal with BW LPG Ltd to sell its fleet of Very Large Gas Carriers (VLGC) for a consideration of $1,050m.
After the closing of this deal, Avance Gas will be the owner of four medium sized gas carriers (MGC) capable of carrying full ammonia cargoes, with a 12.77% shareholding in BW LPG, as well as a substantial cash holding.
The sale was confirmed yesterday in Avance Gas filing with the company mentioning that the sale will generate approximately $315m of profit.
The Avance Gas VLGC fleet today consist of eight 2015-built eco VLGCs and four dual-fuelled VLGCs built in 2022 and 2023.
The transaction, which is subject to approval, is regulated by 10 individual Memorandum of Agreement for the 10 owned VLGCs, while the remaining two VLGCs on sale-leaseback agreement is agreed to be novated with the existing debt obligation.
The transactions and delivery of ships to the buyer is scheduled to take place in the window September 15 to December 31.
The shipowner now says that this enables a smooth handover while allowing Avance Gas to trade the ships for some further period in the winter market.
The top management of the company, the chief of Avance Gas Holding Øystein Kalleklev, says that the estimated book value of the VLGC fleet at delivery is between $730 to $740m which thus is expected to generate a gain on sale to be between $310-320m.
Avance Gas sold in the first half of the year four VLGCs to other buyers with a gain of $121m. As a result, gain on sale of the VLGC fleet is expected to be approximately $435 million for the full year 2024.
Avance Gas will become the second largest shareholder of BW LPG with a shareholding of approximately 12.77%. As it is reported, the sale of the ships is agreed to be settled with approximately $585m of cash, novation of approximately $132m of debt obligations under the SLB, with the remainder being settled as with 19.282m shares in BW LPG at a price of $17.25 per share representing a value of $333m.
Øystein Kalleklev, chief executive officer of Avance Gas Holding, said: “We are pleased to announce the sale of our VLGC fleet at what we consider very attractive terms and conditions.
“The fleet of Avance Gas is today a bit sub-scale and we have therefore found it more attractive for our shareholders to take advantage of the relatively high second-hand prices and sell the VLGC fleet to BW LPG.
“The sale will generate approximately $315 million of profit while at the same time enabling us to probably make a trading profit until delivery of these ships to the buyer.
“During 2024, we have thus successfully agreed the sale of 16 VLGCs with a combined profit of about $435 million which have enabled us to distribute significant dividend to our shareholders and with this sale we will continue to do so until the completion of the transaction by end of the year.
“We are thereby crystalizing the value for our shareholders and becoming the second largest investor in BW LPG.
“We find BW LPG well positioned with an integrated business model priced at a relatively modest price and this transaction will further strengthen BW LPG with both cost and income synergies.
“In our pragmatic view, it doesn’t matter whether the ships are black or light green as long as they are generating cash.
“We will revert on more details in our second quarter results presentation on August 28, but shareholders can rest assure that the profits generated belongs to its shareholders and will be distributed in a timely manner once the transaction concludes”.
