Famatown Finance Limited (“Famatown”), a company indirectly
controlled by trusts settled by Mr. John Fredriksen1 and a member
of the Seatankers Group, which is the largest owner of shares of
common stock, no par value (“Common Stock”) of International
Seaways, Inc. (“International Seaways”) (NYSE:INSW) with ownership
of approximately 16.6% of the outstanding Common Stock, has issued
an open letter to its fellow shareholders of International Seaways.
The full text of the open letter issued to International Seaways
shareholders follows:
A LETTER TO THE SHAREHOLDERS OF
INTERNATIONAL SEAWAYS, INC. (INSW)
MAY 30, 2023
Dear Fellow Shareholders,
Famatown Finance Limited (together with its
affiliates, “Seatankers,” “our,” or “we”) has been a material
shareholder of International Seaways, Inc. (“INSW” or the
“Company”) since March 2022 and currently maintains a significant
16.63% equity stake in the Company. Our involvement as investors in
a variety of public shipping companies over several cycles, working
collaboratively with management and Boards, has garnered us a long
and successful track record of operational success in the shipping
industry.
Today, we are writing to our fellow shareholders
because we are deeply concerned about INSW's lack of responsiveness
and cooperation regarding initiatives that would unlock significant
shareholder value. The Company and its board of directors (the
“Board”) has shown a remarkable level of resistance in discussing
future Seatankers’ representation on the Board, hindering
optimization of INSW's strategic direction, operations, and
corporate governance.
Seatankers invested in INSW in March 2022 with
two primary convictions. First, we believed that the market was
underestimating INSW's potential as an attractive platform with
exposure to crude, product and chemical tanker assets in markets
that were in the early stages of a global recovery. Second, we were
confident that our decades of experience in public shipping
companies, coupled with our comparatively lower financing costs and
wide network in the maritime transportation industry, would enable
Seatankers to help unlock significant long-term value for all INSW
shareholders. Despite INSW's shares having appreciated materially
since our initial investment, we remain steadfast in these two
convictions and believe the market is underestimating INSW’s
potential.
For these reasons, discussed in more detail
below, with respect to the Company’s fast-approaching annual
meeting of stockholders (the “Annual Meeting”), we intend to
express our frustration with the status quo by: (1) withholding our
votes for the reelection of two of the Company’s directors; (2)
voting against the approval of the compensation of the Company’s
Named Executive Officers (“NEO”); (3) voting for the preferred
frequency of future advisory votes on the approval of the NEO
compensation to be set annually; and (4) voting against the
ratification of the Company’s poison pill.
____________________1 The beneficiaries of the
Trusts are members of Mr. Fredriksen’s family. Mr. Fredriksen is
neither a beneficiary nor a trustee of either Trust. Therefore, Mr.
Fredriksen has no economic interest in the Common Stock and Mr.
Fredriksen disclaims any control over the Common Stock, save for
any indirect influence he may have with the trustee of the Trusts,
in his capacity as the settlor of the Trusts.
Seatankers’ Engagement with INSW to
Date
Following public disclosure of our investment in
the Company last year, we made numerous attempts to engage in
constructive dialogue with INSW's management and the Board. Despite
our initial hopes that INSW’s management and the Board consisted of
rational and well-intentioned individuals, we have encountered a
disheartening level of entrenchment, self-interest, and a steadfast
refusal to even consider Seatankers’ value-enhancing initiatives
that we believe are objectively shareholder-friendly. This is
contrary to INSW's public filing on May 11, 2022, stating that the
company is "singularly focused on delivering value to our
shareholders."
What makes the situation even more offensive is
that certain individuals within INSW's Board and management team,
who have adamantly refused to engage with Seatankers, have
shamelessly also taken credit for, and personally benefited (via
increased value of stock compensation), from the material
outperformance in INSW shares that we believe has been driven - in
significant part - by the "halo effect" resulting from the
reputation of Seatankers in creating long-term shareholder value
across other companies in the industry.
It would be particularly inappropriate for the
Board to turn around and point to INSW’s recent share price
appreciation, which we believe is plainly attributable to the
aforementioned halo effect and cyclical industry tailwinds, as a
basis not to meaningfully engage with us, as we believe there
remains significant upside in INSW that is unlocked due in large
part to the Board’s governance failings to date.
We shared a detailed presentation in September
of last year outlining the numerous ways Seatankers might work with
INSW to unlock shareholder value2. Here, we will not rehash these
specific proposals, on which the Board has declined to engage.
Instead, we will summarize a few of INSW's most glaring governance
shortcomings which prevent you, the shareholders of INSW, from
realizing the full value of your investment.
INSW’s Governance
Shortcomings
Onerous Poison Pill In May 2022, following
our Schedule 13D filing and prior to engaging constructively with
Seatankers, INSW's Board unilaterally adopted a shareholder rights
plan or “poison pill”. On April 11, 2023, INSW’s Board decided to
extend by three (3) years, without shareholder approval, what it
had initially described as “a short-term stockholder rights plan”,
thereby erecting an even greater barrier in our efforts to
communicate effectively with the Company and other shareholders of
INSW regarding the significant value that could be unlocked for all
INSW shareholders.
From the outset, INSW has erroneously viewed
Seatankers’ investment as a "threat," characterizing it in public
filings as "stealth" and justifying the adoption of the poison pill
as "particularly appropriate where one of the company's competitors
has quickly and secretly amassed a significant stake in the
company." Our method of acquiring INSW shares in the open market
was simply the most cost-effective and efficient way to acquire the
shares without notifying market participants of our interest, which
would have materially increased our acquisition cost. Additionally,
we have clearly stated on numerous occasions both publicly and in
private communications with INSW, our intention has never been to
acquire control of INSW but rather to work constructively with the
company to effect meaningful improvements that will benefit INSW
and all its shareholders.
The unilateral decisions of the Board in May
2022 and April 2023 to adopt a poison pill without seeking
shareholder approval and that can be withdrawn or amended only by
the Board, further demonstrate the self-preservation motives
underlying the Company's actions. The perceived "threat" is not to
INSW shareholders but to the ability of INSW’s management and the
Board to preserve their own personal interests at the expense of
the shareholders they should represent. The poison pill effectively
precludes Seatankers from having productive discussions with other
INSW shareholders over the fear that our conversations with fellow
potentially like-minded INSW shareholders will trigger the poison
pill’s dilution provisions.
For these reasons, it should come as no surprise
that we intend to vote AGAINST the ratification of the Company’s
poison pill at the upcoming Annual Meeting.
____________________2 This presentation can be
found at here.
Bloated Board Size Despite INSW's own
admissions that "a full Board ranging in size from five (5) to nine
(9) members is optimal,"3 the Company continues to maintain an
inefficient and bloated 10-member Board. This imposes an
unnecessary financial burden on INSW shareholders, unnecessarily
complicates a decision-making process that would be more efficient
with a smaller board and is evidence of a corporate culture that
lacks the discipline to follow industry best practices and its own
corporate governance guidelines.
The Board size expanded when INSW acquired
Diamond S Shipping Inc. in 2021 (the “Diamond S Shipping Merger”),
and it now exceeds that of all its shipping peers, which average 6
to 7 members. During INSW's March 2021 Diamond S Shipping Merger
shareholder call, the elimination of "duplicative board costs" was
cited as one of the primary drivers of the anticipated $23 million
in annual cost savings.
Seatankers agrees with INSW’s own Corporate
Governance Guidelines and strongly believes that a five to
nine-member Board, inclusive of Seatankers’ nominees, is optimal
and would be greatly beneficial through injecting the viewpoint of
a shareholder, especially one with deep industry experience and
background, into INSW's boardroom.
For our part, we intend to WITHHOLD our votes at
the Annual Meeting for the re-election of the two Company’s
directors we feel removing would most benefit shareholders and
serve to bring the Board down to a more appropriate size: Alexandra
K. Blakenship and Lois K. Zabrocky.
INSW’s Outsized Executive Compensation is
Indicative of Broader Governance Failures According to this
year’s proxy statement, INSW’s executive compensation is
significantly higher than that of similarly-sized peers. Making
matters worse, INSW fails to provide full transparency regarding
the specific targets and components underlying its generous
executive compensation plan and deprives INSW shareholders of the
opportunity to meaningfully (as opposed to advisory) vote on
executive compensation matters.
For these reasons, we intend to vote AGAINST the
approval of the compensation of the NEOs for 2022 and FOR the
enactment of annual advisory shareholder votes on NEO
compensation.
Shareholders Have an Opportunity Now to
Right the INSW Ship
INSW shareholders have an opportunity to ensure
that meaningful change is brought about at INSW. We cannot afford
to let further lost opportunities, corporate governance failures,
and continued value destruction by INSW's management and the Board
persist. Recent share outperformance is not related to management’s
decision-making, but external factors – including Seatankers taking
a stake in the company and a positive industry cycle. With much of
the "easy money" from the recent stabilization in tanker demand and
rates now behind us, it is imperative that the Board and management
fulfill their duties to act in the best interest of shareholders by
engaging with Seatankers and other stakeholders to consider all
available value-enhancing initiatives.
In the coming weeks and months, we will disclose
more details regarding our vision for INSW. We look forward to
engaging with our fellow shareholders as we strive for positive
change. We remain hopeful that we can reach a reasonable resolution
without the need for a future proxy contest.
Together, let us drive forward the necessary
changes to safeguard our investment and maximize shareholder
value.
Cautionary Statements
Statements contained in this press release that
are not historical facts are forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements include words or phrases such as
“anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,”
“project,” “could,” “may,” “might,” “should,” “will” and similar
words and specifically include statements relating to future
financial performance and shareholder value. Forward-looking
statements are aspirational and are not guarantees or promises that
such expectations, plans, or goals will be met. They are also
subject to numerous risks, uncertainties and assumptions that may
cause actual results to vary materially from those indicated. Each
forward-looking statement speaks only as of the date of the
particular statement and we undertake no obligation to update or
revise any forward-looking or other statements, except as required
by law and notwithstanding any historical practice of doing so.
____________________3 International Seaways,
Inc. Corporate Governance Guidelines
Investor & Media Contact:
Elena Varnavaelena.varnava@seatankers.com.cy+ 357 25 858300
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