Image credit: BW Group.
Avance Gas Holding Ltd. has agreed to sell its fleet of Very Large Gas Carriers (VLGCs) to BW LPG Ltd for a total of $1.05 billion. The transaction involves eight eco VLGCs built in 2015 and four dual-fueled VLGCs built in 2022 and 2023.
The sale will be settled with a combination of cash, debt novation, and shares in BW LPG. Avance Gas will receive $585 million in cash, $132 million in debt novation, and 19.282 million shares in BW LPG valued at $333 million. This makes Avance Gas the second-largest shareholder of BW LPG with a 12.77% stake.
The estimated book value of the VLGC fleet at delivery is between $730 million and $740 million, resulting in an expected profit from the sale of $310 million to $320 million. This adds to the $121 million profit made from the sale of four VLGCs in the first half of 2024, bringing the total expected profit for the full year to approximately $435 million.
Net cash proceeds from the sale are expected to be around $217 million, contributing to a pro forma cash balance of $257 million. Avance Gas generated positive cash flow in the second quarter with an average Time Charter Equivalent (TCE) rate of $48,000 per day.
After the transaction closes, Avance Gas will own four medium-sized gas carriers (MGCs) capable of carrying full ammonia cargoes, a 12.77% shareholding in BW LPG, and a substantial cash holding.
Øystein Kalleklev, Chief Executive Officer of Avance Gas, stated that the sale of the VLGC fleet to BW LPG was a strategic decision to capitalize on the relatively high second-hand prices and generate significant profits for shareholders. He also assured shareholders that the profits would be distributed in a timely manner after the transaction concludes.
The transaction is subject to customary closing procedures and the approval of novation of certain agreements.