#USA #New York #Arnhold LLC #Ocean Wilsons #Hansa Investment

Arnhold LLC's Rejection of the Merger Proposal

In an assertive move, Arnhold LLC, the investment manager for client accounts owning around 900,000 shares of Ocean Wilsons Holdings Limited, issued an open letter to fellow shareholders on August 26, 2025. The letter articulates their firm opposition to the proposed all-share combination with Hansa Investment Company Limited, scheduled for a vote at the Scheme Meeting on September 12, 2025.

Key Concerns Raised by Arnhold

Arnhold's letter emphasizes multiple concerns regarding the merger's fairness and financial implications for Ocean Wilsons' shareholders. They argue that the terms of the merger are significantly flawed and do not accurately represent the contributions of both companies. In particular, Arnhold believes that the merger would lead to a substantial loss of value for Ocean Wilsons' public shareholders.

One crucial point made is that the merger would only provide Ocean Wilsons shareholders with equity worth approximately £12 per share, while the current net asset value (NAV) of their shares is claimed to exceed £20. Such a disparity, Arnhold argues, represents an unacceptable 40% discount on the current NAV, thus questioning the viability of the merger proposal.

Analysis of the Proposed Combination's Structure

A significant criticism within the letter revolves around the valuation methods used to determine the exchange ratio between the two companies. Arnhold describes the deal as a NAV-for-NAV transaction, which inherently disadvantages Ocean Wilsons because it neglects the vastly different compositions of the investment portfolios from both parties. They highlight that around 58% of Ocean Wilsons’ NAV is held in cash, compared to Hansa’s investment portfolio, which reportedly comprises only 3.4% in cash equivalents.

This difference leads to Arnhold's calculation, suggesting that shareholders of Ocean Wilsons might receive only 60-65 cents' worth for every dollar of cash held if the merger proceeds as planned. Such expectations are deemed unfair, especially considering the evident disparity in asset composition.

The Inflation of Hansa's Stake

Arnhold also raises concerns regarding the perceived inflation of Hansa's ownership stake in Ocean Wilsons, arguing that the calculation values attributed to Hansa might not reflect the true market value. They posit that this inflated valuation could further reduce the value received by Ocean Wilsons' shareholders in the merger. Hansa's own report of a notable NAV increase enhances Arnhold's concerns that the merger's structure primarily favors Hansa, leaving Ocean Wilsons' shareholders at a disadvantage.

The Role of Related Parties

The letter also brings attention to potential conflicts of interest related to key figures in both companies. It suggests that major stakeholders and management figures, including William Salomon and Christopher Townsend, may have divergent interests that may not align with the welfare of Ocean Wilsons' shareholders. This raises questions about whether the merger serves the best interests of the public shareholders or merely caters to those in control.

Alternatives to the Proposed Merger

Alongside their objections, Arnhold presents several alternative strategies that they believe would better serve Ocean Wilsons' shareholders. Following a recent considerable cash influx from the sale of its ports business, Arnhold argues that Ocean Wilsons has the means to issue dividends or repurchase shares, allowing shareholders to realize nearly equivalent value in cash rather than illiquid equity.

Conclusion

In summary, Arnhold LLC has laid out a comprehensive critique of the proposed merger between Ocean Wilsons and Hansa Investment Company. The potential undervaluation of shares and the methodical flaws in the merger's calculations raise substantial red flags. As the Scheme Meeting approaches, the potential outcomes hang in the balance, and Arnhold is urging other shareholders to consider the long-term implications for Ocean Wilsons. Their recommendation is clear: vote against the merger to safeguard shareholder value and preserve the financial integrity of Ocean Wilsons.