Bermudian-based Frontline Ltd has acknowledged the decision by DHT Holdings to reject an offer to combine the crude oil tanker businesses.

Frontline, which is more than twice the size of DHT in terms of market capitalisation and fleet size, had proposed to acquire all the outstanding common shares of DHT for a per-share consideration of 0.725 Frontline shares.

By doing so said it would create the largest public tanker company by fleet size and market capitalisation.

However, the directors of DHT, which is also domiciled in Bermuda, this week unanimously rejected the unsolicited proposal. Erik Lind, chairman of DHT said: “We believe that Frontline’s proposal substantially undervalues our company and represents an opportunistic attempt to acquire DHT at a low point in the cycle.”

In response, Robert Hvide Macleod, Frontline’s chief executive officer, said: “We believe that our offer to DHT shareholders is highly compelling since it provides a meaningful upfront premium, while also giving all shareholders the opportunity to realise the full benefit of the significant synergies and attractive upside that a combined company would create.”

In a statement, Frontline said the proposed offer represented a 19 per cent premium on the share price of DHT at closing on January 27.

The statement added: “Rather than engaging in discussions with Frontline with the aim of achieving the highest possible offer to create maximum shareholder value, the board of directors of DHT adopted a one-year shareholder rights plan and has since continued to refuse to enter into any discussions.

“DHT also stated that the proposed offer represented an opportunistic attempt to acquire DHT at a low point in the cycle, which Frontline finds irrelevant given the all-share offer.”

Frontline believes that combining the two companies would better position them to participate in a market recovery.

Frontline has a market capitalisation of $1.15 billion, and a fleet of 59 ships, including 19 very large crude carriers, also known as VLCC. Together with its affiliates, it has already bought 15.3 million shares of DHT, representing 16.4 per cent of its outstanding common stock.

DHT has a market capitalisation of $44.9 million, and a fleet of 19 VLCC and two Aframax tankers.