Frontline Ltd. and Euronav NV are considering an all-stock merger that would produce the world’s biggest tanker fleet, just as Russia’s invasion of Ukraine drives recovery in the market.

The creation of a tanker behemoth — capable of carrying the equivalent of about 100 days of German daily oil demand — would come at an opportune moment. With shippers shunning Russian vessels, demand for other carriers is increasing, boosting a market that’s languished for more than a year.

Shares of both Frontline and Euronav have rallied this year, valuing a combined tanker company at more than $4.2 billion.

“A combination of Frontline and Euronav would establish a market leader in the tanker market and position the combined group for continued shareholder value creation in addition to significant synergies,” John Fredriksen, who owns a 39 percent stake in Frontline, said in a joint statement.

The two operators signed a term sheet on a potential combination with an exchange ratio of 1.45 Frontline shares for every Euronav share, the companies said in the statement. That would result in Euronav shareholders owning about 59 percent of the combined entity and Frontline investors holding 41 percent.

The proposal has been unanimously approved by the boards of both Frontline and Euronav.

Should the deal go ahead, the combined group would continue under the name Frontline and still operate from Belgium, Norway, the U.K., Singapore, Greece and the U.S. Euronav Chief Executive Officer Hugo De Stoop would take the same position at the merged company.

The new entity would have 69 very large crude carriers and 57 Suezmax vessels. It would be capable of carrying about 225 million barrels of oil, according to data compiled by Bloomberg from Clarkson Research Services Ltd.

Market Heft

That heft could be a counter-balance to the giant trading houses and oil companies that hire vessels in the relatively fragmented tanker market.

“Consolidation is always good for the market,” said Halvor Ellefsen, a shipbroker at Fearnleys A/S in Oslo. “It tilts the balance more toward owners when negotiating rates.”

De Stoop said in October that the companies weren’t then in talks to merge with Frontline, but that Euronav was open to a combination.

It’s anticipated that Euronav will pay total dividends of as much as 12 cents before the deal closes, with no impact on the exchange ratio.