Ocean Wilsons (OCN) has rejected criticisms of its proposed £900m merger with Hansa Investment Company (HANA) by US fund manager Arnhold as “inaccurate and misleading”.
Having met and corresponded with Arnhold over its concerns, Ocean Wilsons said it was “extremely disappointed” to see its claims repeated in an open letter on Monday.
Ocean Wilsons said it was “simply wrong” for the New York firm to say that shareholders were selling assets worth £20.18 per share for 40% less by exchanging them for Hansa shares worth around £12.
Ocean Wilsons said its shareholders would get 1.4925 new Hansa shares to give them the same economic interest of £20.16 per share in the combined group’s net asset value.
“Comparing the Ocean Wilsons FAV [formula asset value] per share to the Hansa share price, as Arnold has sought to do, is therefore misleading and not a like-for-like comparison,” it said.
Ocean Wilsons also dismissed Arnold’s argument that Hansa’s shareholding in Ocean Wilsons should have been valued at market value and not net asset value (NAV). This would have led to the “commercially nonsensical outcome” in which Ocean Wilsons and Hansa’s shareholders’ interests in the combined group would be different to the proportion of assets contributed by them to the merger.
“The proposed combination comprises the merger of two investment portfolios and, as such, it is the NAV of each company (and the respective contributions of Ocean Wilsons’ and Hansa’s shareholders to the NAV of the combined group), that should determine the exchange ratio.
“This is a customary approach when looking to combine two investment portfolios and Ocean Wilsons’ share price is simply irrelevant for these purposes, as Ocean Wilsons’ shares will not form part of the investment portfolio of the combined group, whereas its assets will,” it added.
Ocean Wilsons also responded to Arnhold’s criticism of William Salomon and Christopher Townsend, chair and senior partner at both companies’ fund manager Hanseatic Asset Management and major shareholders in Ocean Wilsons and Hansa. Arnhold said the pair should have been excluded from an independent shareholder vote on the deal.
In reply, Ocean Wilsons said its board had established a committee independent of both directors to assess the merger before recommending it and that the rate of Hanseatic’s annual management feel would fall over 20% from the 1% currently paid by Ocean Wilsons shareholders.
“Any suggestion that the management fee arrangements proposed under the combinations are intended to benefit Mr Salomon and Mr Townsend is therefor inaccurate and unsubstantiated.”
The merger would create a differentiated investment company of meaningful scale and lower, more competitive costs. By contrast, Ocean Wilsons faced a number of potential risks following the recent sale of its stake in port operator Wilson Sons. It would have had to transfer to a closed-end investment funds listing category, a process that could have seen its shares suspended for a time. The new rules would have constrained its ability to provide share buybacks and the loss of cash flow from Wilson Sons would have limited its future dividends.
Ocean Wilsons said its independent committee continued to recommend the merger as in the best interests of its shareholders. Shareholders will vote on 12 September.
