Arnhold, a New York-based fund manager, says it will vote against the merger of Ocean Wilsons with Hansa Investment Company, saying a wind-up of the company would be best for its shareholders.

Arnhold, a US value investor, has challenged the £900m merger of Hansa Investment Company (HANA) and Ocean Wilsons (OCN), saying it is unfair to the latter’s shareholders, who would be better off if the company was wound up and its cash returned to investors.

In an open letter to Ocean Wilsons shareholders published on Monday, Arnhold, a holder of 900,000 shares in the company, said it would vote against the merger at a general meeting on 12 September. It said its calculations showed that shareholders in Ocean Wilson would receive illiquid Hansa stock worth around £12 per share, 40% less than the underlying £20.16 net asset value (NAV) of their shares at 14 August.

Ocean Wilsons responded on Thursday with its own letter blasting Arnhold’s criticisms as “simply wrong” and “misleading”. Read the story here.

By contrast, Arnold said Hansa would receive the full value of its strategic stake in Ocean Wilson because it would receive its investment portfolio and not new Hansa shares as payment.

Arnhold said the fall in Ocean Wilsons shares from £14.75 on 16 June to £12.20 on 22 August showed the market’s negative assessment of the deal. In contrast, Hansa stock had risen from £2.26 to £2.71, although it has fallen 1% to £2.68 today.

The merger of Hansa and Ocean Wilsons has been seen as a long overdue piece of corporate simplification that could result in a re-rating of Hansa’s highly discounted shares. Their low rating reflected corporate governance concerns over the fact that ordinary shareholders in the global investment trust controlled by the Salomon banking family did not have voting rights.

Both companies had similar multi-asset portfolios managed by Hanseatic Asset Management. The main historic difference was Ocean Wilsons’ holding in Brazil port operator Wilson Sons, the sale of which netted a $594m cash windfall in June and paved the way for the two to combine.

Arnhold complained that the terms of the NAV-for-NAV transaction were unfair because they ignored the fact that 58% of Ocean Wilsons’ net assets were now in cash compared to the 3.4% level of Hansa’s investment portfolio.

It said the effect of this was that each dollar of Ocean Wilsons’ cash would be sold for only 60-65 cents considering the 35%-40% discount at which its non-voting ordinary shares have traded in the past.

The New York-based firm alleged that Hansa’s stake in Ocean Wilsons had been inflated, again to the detriment of the latter’s shareholders. It highlighted Hansa’s reporting a 15.6% rise in net asset value from £4.02 to £4.65 as evidence of this.

It was concerned that William Salomon and Christopher Townsend, respectively chair and senior partner at Hanseatic Asset Management, were permitted to vote in the general meeting given the merger appeared prejudicial to minority shareholders. According to Arnhold, Salomon and Townsend have interests in 30.75% of Ocean Wilsons shares, 53.79% of Hansa’s voting shares and 7.87% of its non-voting shares. Both are directors of Ocean Wilsons with Salomon also sitting on Hansa’s board.

Arnhold believes it would be better for Ocean Wilsons shareholders if the cash pile were paid out as an £11.75 per share special dividend. That would leave £8.41 per share of investments that could be sold over time to give back shareholders the full value of their money.

The company invited Ocean Wilsons shareholders to contact analyst Ren Richmond to discuss the situation.

Ocean Wilsons has responded to Arnhold’s letter, dismissing its criticisms as “simply wrong” and “misleading”.