NRS suing NTS over its move to block SalmoNor acquisition
Norway Royal Salmon (NRS) is suing NTS, its majority shareholder, over its blockage of a share issuance intended to give NRS the capital it needed to acquire SalmoNor.
NTS, which acquired a majority share of Norway Royal Salmon in August 2021, voted against a proposal by NRS’ board at the latter’s annual stockholder meeting on 7 April that would have approved a private placement of new shares worth NOK 1.9 billion (USD 216 million, EUR 200 million) and a public offering of 1.5 million shares at NOK 202 (USD 22.99, EUR 21.19) each, raising an additional NOK 303 million (USD 34.5 million, EUR 31.8 million).
NRS said the action was in violation of NTS’ purchase agreement, signed 11 January, 2022, which “contains a clear and express provision requiring NTS to be represented at the general meeting with all its shares in NRS and vote in favor of the share issue.”
“NTS has breached this obligation by voting against the share issue. Accordingly, NRS is not able to complete the share issue, and the SalmoNor acquisition cannot be completed in accordance with the agreement. This will result in a significant economic loss for NRS and its shareholders,” NRS said in a press release.
NTS acquired SalmoNor in June 2021 and announced its intention to merge it with its subsidiary, Midt-Norsk Havbruk AS. Following its purchase of a majority stake in NRS in August 2021, it sought to combine NRS and SalmoNor through a share-purchase agreement whereby NRS Farming would acquire 100 percent of SalmoNor’s shares.
But in February 2022, NTS itself became the subject of an acquisition, with SalMar launching a voluntary offer for all outstanding shares in NTS. Its proposal received majority acceptance from NTS shareholders on 16 February.
In voting against NRS’ fundraising scheme on 7 April, NTS justified its action by saying the Norwegian Securities Trading Act prohibited it from approving the proposal without first receiving majority approval from its own shareholders, as a result of the SalMar transaction. But NRS disagreed, saying its own deal with NTS had come before SalMar made its offer for NTS, and that SalMar’s purchase of NTS “is conditional upon neither the share issue nor the sale of SalmoNor being completed.”
“The fact that an offer for NTS was made after the entry into the agreement does not prevent NTS from complying with its obligations under already existing agreements, and does not give NTS any right to withdraw from its obligations,” it said. “The independent board therefore considers that the vote of NTS at the general meeting on 7 April was a breach of the share-purchase agreement.”
In its release, NRS expressed frustration that NTS had not called for a general shareholder meeting until Thursday, 8 April – which scheduled the meeting for Friday, 29 April.
“NTS has had the ability to call such a meeting at any time since the first bid for NTS was announced on 17 January, 2022, since NTS already at that time, based on the interpretation of [the law] they are now putting forward, found themselves in a situation where they could not comply with their obligations under the SalmoNor agreement,” NRS said. “NTS has never communicated to NRS that such a general meeting could be an alternative. Instead, NTS has chosen to wait with a notice of such a general meeting until after the share issue has lapsed as a result of NTS's vote at the general meeting on 7 April.”
NRS said it did not believe NTS shareholders would support NRS’ share issuance, and said that regardless of that fact, the issuance offer had lapsed as a result of the 7 April vote. It called the future possibility of its acquisition of SalmoNor “uncertain.”
“In any event, it is not acceptable that the question of whether NTS should comply with a legally binding agreement is made subject to a vote at NTS' general meeting,” it said.
The lawsuit is a result of NRS’ attempt to avoid losses as a result of the failure of the transaction, it said.
“The independent board has an obligation to protect the values of the company and the shareholders, and cannot accept that a significant loss is imposed on NRS as a result of NTS breaching a contractual voting undertaking and using its voting power to free itself of the obligation to sell SalmoNor AS in accordance with the agreement which as been entered into. The independent board has therefore found it necessary to decide to file a lawsuit against NTS claiming damages for breach of contract,” it said. “A failure to compete the SalmoNor transaction will lead to a significant economic loss for NRS. Even if it should prove possible to complete the transaction at a later time, a delay until after the completion of Salmar's bid for NTS, will have material negative consequences for NRS and its shareholders. From an operational perspective, a significant delay in completing the transaction will be very unfortunate. A delay will also create significant market risk relating to the share issue which will need to be carried out, and will lead to the minority shareholders losing the possibility of a pass-through mandatory offer upon a change of control in NTS.”
NRS’ board said it had attempted to avoid the fallout in its relationship with its majority shareholder but that its primary duty lay in protecting its shareholders’ interests.
“NRS has throughout the process sought to maintain a constructive dialogue with NTS, and has been open to discuss alternative solutions,” it said. “For the independent board, it has however been a clear condition for any such alternative solution that the values of NRS and its shareholders are protected. The SalmoNor transaction is, for NRS, a transaction with its main shareholder, and it has therefore been particularly important for the independent board to ensure that the interests of all shareholders of NRS are being protected. There have been no proposals from NTS which have protected that shareholder values in NRS.”
Photo courtesy of Norway Royal Salmon