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Saturday, May 18, 2024

Dramatic end to the Dynamic Duo

NEWS ANALYSIS: For nearly two decades, Norway’s legendary shipping tycoon John Fredriksen and his right-hand man Tor Olav Trøim built up Fredriksen’s fortunes as the country’s own “Dynamic Duo.” Now they’ve split up, and tongues are wagging over what their business divorce will mean to the future of Fredriksen’s empire and the one Trøim now may build on his own.

Tor Olav Trøim (left) has been the right-hand man for shipping magnate John Fredriksen since 1995. Now he's secured a major shareholding for himself and says they'll be working "differently." PHOTO: NTB Scanpix
Tor Olav Trøim (left) has worked for shipping magnate John Fredriksen since 1995. Now they’re going their separate ways, setting off a dramatic series of board changes and share sales at companies that Fredriksen has controlled. PHOTO: NTB Scanpix

The two generated headlines at the end of July, when they announced that Trøim wanted to pare down his far-flung assignments for Fredriksen and concentrate on the Fredriksen-controlled gas shipping company Golar LNG and the offshore deepwater drilling company Seadrill. Trøim resigned his more-than-full-time position at the Fredriksen group’s Seatankers Group and received what was dubbed as “the greatest severance deal of all time,”  in the form of 3 million shares of Golar LNG and 2 million shares in Seadrill Ltd, worth a total of NOK 1.6 billion (USD 267 million) at the time.

Trøim insisted he would be working “just as much as before” on his efforts to further build up Golar and Seadrill for the Fredriksen group and other shareholders. Just over a month later, however, Fredriksen sold off his controlling stake in Golar LNG and on Friday came news that Trøim was resigning as a director of Seadrill. That sent shares in Seadrill, already facing a tough market in the drilling rig business, into a dive, since Trøim had received much of the credit for building Seadrill into the world’s largest drilling firm.

Trøim also withdrew from the group’s oil services firm Archer on Friday afternoon and newspaper Dagens Næringsliv (DN) was the first to report on Monday that Trøim also was leaving the board of the huge Fredriksen-controlled salmon farming company Marine Harvest.

Fredriksen ‘long term’ in Seadrill
On Tuesday came news that one of Fredriksen’s many companies, Hemen Holding, had bought 2 million more shares of Seadrill. It wasn’t immediately clear whether the shares were those that Fredriksen had given to Trøim as part of his compensation package in July, but given the string of Trøim’s resignations from Fredriksen-controlled firms, not least Seadrill, that would be no surprise. TDN Finans reported that the deal sent Seadrill’s up nearly 2 percent Tuesday morning, and it means that Fredriksen now controls 22.34 percent of Seadrill, in which he’s said to still have great faith.

“I consider my stake in Seadrill a long-term investment, and (other) investors can rest assured that no divestment is considered for the foreseeable future,” Fredriksen, who serves as chairman of Seadrill, stated at the company’s annual meeting in Bermuda on Friday, after Trøim’s resignation was announced. “The board has gone to great lengths to build a strong and independent management team and we are pleased with the results of our efforts.” In an apparent effort to downplay the resignation of Trøim, Fredriksen stressed that the management team now in place at Seadrill “has a long history with the company and brings the energy and leadership required to drive results going forward. Although the market is currently challenging, the long-term fundamentals of the offshore drilling business are well intact.”

Trøim sticks with Golar, eyes new ventures
The string of board membership changes and share transactions has cemented what amounts to the divorce between Fredriksen and Trøim, leaving Fredriksen with Seadrill, Marine Harvest, Seatankers and a variety of other businesses, and Trøim with Golar LNG and ambitions, reports DN, to establish a new consulting, management and investment firm based in London. He’ll begin with his already considerable shareholding in Golar LNG and either his 2 million shares in Seadrill or, more likely, the proceeds of their sale back to Fredriksen for around NOK 358 million (around USD 57 million). DN reported that Trøim intends to build up a larger portfolio of companies and he was re-elected last week to his seat on the board of Golar LNG.

Trøim has stayed mostly mum about all the changes, citing confidentiality clauses, but Fredriksen told DN on Sunday that Golar LNG had opted for a more speculative strategy “that we disagreed with.” Fredriksen, known as having a cast-iron stomach for taking risks as he built up his shipping empire, appears to have become more cautious than Trøim in recent years. He indicated that in an interview with DN last spring when Fredriksen said that Trøim was often pushing for more growth while he was stepping on the brakes. The two clearly disagreed on a course for Golar LNG. Trøim, reported DN, wanted to further develop Golar LNG by launching into the risky market for floating gas production but Fredriksen was opposed.

Consolidation vs growth
“We would rather focus on Seadrill,” Fredriksen told DN, claiming it has “a solid contract reserve” and is a company “in which we see great opportunities for the future.”

That led to Fredriksen selling off his Golar holdings. DN reported that Trøim nonetheless played a central role in the Golar share sales by Fredriksen’s company World Shipholding. The sale left Fredriksen, already one of the richest men in the world, with more than NOK 11 billion in cash and Golar with one of the world’s largest funds, Capital World, as a major. Golar’s 10 largest investors reportedly bought much of the rest.

Fredriksen, who turned 70 earlier this year, wants to consolidate his empire and concentrate on shipping, salmon farming and offshore rigs. Trøim, age 51, wants to pursue further growth strategies and can now do so on his own. Indications are that personal relations between Fredriksen and Trøim have chilled but they’re also in different stages of life and with different goals. Their divorce may not have been entirely amicable, despite the positive spin they put on the initial changes in late July, but it appears civil and well-orchestrated so far.

Speculation over daughters and Cermaq
Fredriksen still has a small and close circle of trusted employees around him along with his twin daughters who now may take on bigger roles at his firms. His daughter Cecilie Astrup Fredriksen is on the board of Marine Harvest and his other daughter Kathrine Astrup Fredriksen is already a director of Seadrill. In line with all the changes, she resigned as a director at Golar LNG over the weekend, just a day after Trøim resigned from Seadrill. Sir Frank Joseph Chapman was named to take over Fredriksen’s post as chairman of Golar LNG and Trøim remains on its board. Marine Harvest will hold an extraordinary meeting to replace Trøim on its board, probably with Fredriksen’s new close associate, Ørjan Svanevik. Seadrill will also be replacing Trøim, likely with one of Fredriksen’s choices.

More speculation was flying on Tuesday over whether Fredriksen, flush with cash after his sale of Golar shares, will now challenge a bid for Marine Harvest’s rival salmon farming firm Cermaq from Mitsubishi of Japan. Mitsubishi has offered NOK 8.8 billion to take over Cermaq, in which the Norwegian government now holds the biggest stake of 59 percent but is ready to sell it. DN reported Tuesday that the Fredriksen-controlled Marine Harvest is evaluating whether to make a higher bid but analysts think Marine Harvest has enough exposure to the market and that Mitsubishi will prevail. Fredriksen and his Marine Harvest executives have a month in which to make up their minds. Berglund



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