John Fredriksen will merge tanker companies Frontline and Frontline 2012, the Norwegian shipping tycoon announced on Thursday, Reuters said July 2.

Frontline 2012 was spun off from Frontline three years ago and has since divested its dry-bulk and gas fleet to focus on crude oil and product tankers.

"With the current strong tanker market and attractive cash break-even rates, we believe the Combined Company will generate significant free cash. The intention is to pay out excess cash as dividends at the Board's discretion," Fredriksen said in a statement.

One share in Frontline 2012 will give the holder the right to 2.55 shares in Frontline which expects to issue around 584 million shares to shareholders of Frontline 2012.

Shares in Frontline were down by 6 percent at 0735 GMT while Frontline 2012 was up 12.5 percent in thin trade on Oslo's unlisted market.

Once the world's biggest crude tanker firm, Frontline has struggled in recent years, but increased demand for transport and storage due to an oil supply glut has boosted demand.

After the merger Frontline will have a fleet of 90 crude and product tanker vessels.

"The combined company will have a large fleet and a strong balance sheet which puts us in a position to gain further market share through acquisitions and consolidation opportunities," Fredriksen said in a statement.

Offshore