Shipping firms face the risk of hostile takeovers

PUBLIC shipping companies have been warned they are vulnerable to hostile takeovers by shareholder activists engaging in damaging proxy fights to gain greater control, writes Michelle Wiese Bockmann .

Blank Rome attorney Keith Gottfried told the Connecticut Maritime Association that shareholder activists posed a “significant threat” to listed shipping companies and forecast they would find new targets in 2009. “Many companies are sitting ducks,” he said.

Largely driven by hedge funds, activity by shareholder activists has risen substantially in the US in 2009, with Mr Gottfried recording 64 new cases so far this year.

This nearly exceeded activity for the whole of 2008, when shareholder activists gained seats on 86 boards in New York-listed companies. “These folk decide they know better than you how to run your company,” Mr Gottfried said. “They tend to be very arrogant and very confident.

“They will not go away easily. It is possible for a company to be stolen by a shareholder activist right under their noses.”

Nasdaq-listed offshore marine company Trico Marine Services is the highest profile maritime transport company to be targeted by shareholder activists.

The company is embroiled in a row with rival Oslo-based Kistefos, which has a 22.9% stake, and is trying to gain greater board control and overthrow the incumbent chairman and chief executive. The proxy fight has focused on corporate governance issues, as the company’s shares have fallen 90% in the last 12 months.

Kistefos controls Viking Supply, which supplies offshore supply and anchor handling vessels in the North Sea.

Mr Gottfried said many other companies had been hit by proxy fights and shareholder activists. “I do believe that this will continue to be a significant threat for companies in the shipping industry,” he said. “Trico will not be the first.”

A typical shareholder activist had a 5%-10% stake in the company, had already approached major investors and lenders before making any moves and believed the company was underperforming, he said.

He advised companies to review their certificates of incorporation and bylaws, and consider adopting a shareholder rights plan as a form of defence against any hostile takeover. They should also review their shareholder profile to identify hedge funds and investors likely to target the company, and to know their voting strategies.

“Be prepared to defend the company’s board nominees,” Mr Gottfried added.

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