NEW YORK (TheStreet) -- Shares of Frontline (FRO) - Get Report were falling 6% to $2.42 Thursday after the announcement that the oil tanker company will merge with Frontline 2012.

Frontline will pay about $1.5 billion to acquire Frontline 2012 as part of the merger. Following the merger Frontline 2012 will become a subsidiary of Frontline.

The combined company will have a fleet of about 90 vessels including about 25 VLCCs, 17 Suezmax tankers, 16 MR product tankers, and 10 LR2 Aframax tankers. The company will also have a newbuilding program of about 22 vessels that are scheduled to be delivered between 2015 and 2017.

Frontline 2012 was spun off from Frontline in 2012 to control the company's most modern ships and new vessel orders, according to Bloomberg.

About 2.5 million shares of Frontline were traded by 11:34 a.m. Thursday, compared to the company's average trading volume of about 3 million shares a day.

TheStreet Ratings team rates FRONTLINE LTD as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate FRONTLINE LTD (FRO) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. Among the areas we feel are negative, one of the most important has been a generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • FRO has underperformed the S&P 500 Index, declining 8.25% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • Despite the weak revenue results, FRO has outperformed against the industry average of 38.7%. Since the same quarter one year prior, revenues fell by 15.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • 46.00% is the gross profit margin for FRONTLINE LTD which we consider to be strong. It has increased significantly from the same period last year. Along with this, the net profit margin of 21.55% significantly outperformed against the industry average.
  • Net operating cash flow has significantly increased by 103.15% to $42.97 million when compared to the same quarter last year. In addition, FRONTLINE LTD has also vastly surpassed the industry average cash flow growth rate of -53.17%.
  • FRONTLINE LTD reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, FRONTLINE LTD continued to lose money by earning -$1.66 versus -$2.38 in the prior year. This year, the market expects an improvement in earnings ($0.48 versus -$1.66).