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It would also mean Mazroui and Horizon injecting capital of $15m to maintain their % which I am not sure they want to do. They can ofcourse inject capital at a higher valuation (i.e. less dilutive terms for e.g. at 22p) and making it easier for anyone to maintain same ownership levels.
Not sure how they could raise 75m from anyone without a shareholder approval. However, if you remember, one of the agenda at the AGM was to give the board the power to raise capital without getting shareholder approval. Perhaps they will go this route once the new board is in.
The result of today's vote was of course signaled two weeks ago so nothing really new in today's RNS. My overwhelming hunch is still that SF and friends are forcing the company into raising the $75m from themselves and/or some other sort of similar transaction e.g. reverse merger. That wouldn't be ideal for other existing shareholders as it would be at a dilutive valuation, but so would raising $75m through the traditional rights issue process. All still better than the administration scenario and we would still have exposure (albeit diluted) to the recovery story. Of course, one can mitigate that dilution by snapping up an implied pro-rata amount of shares once SF's intentions are clear.
Personally I dont see anything encouraging in the RNS release today:
"On 8 October 2020, the Company announced that as a result of Seafox International Limited's recent actions, having taken advice from its financial adviser and having sought feedback from its corporate brokers, it is currently impracticable to proceed with the Equity Raise and that, therefore, there is no reasonable prospect that the Equity Raise can be completed prior to the end of 2020.
In the absence of the Equity Raise, and if the Warrants are not issued by 31 December 2020, the Company will be in default under its bank facilities. If the Lenders enforce their rights, the Company could be put into administration and shareholders could lose the entire value of their investment."
I think (and hope) they have just been causing disruption to stop the board turning the company around and completing the equity raise. If the BOD had been free and focused to do so then the share price would be north of 30p and SF would have to bid considerably more given the positive platform the BOD would have created. Whereas now, if they bid 22p a lot of shareholders would sell through boredom !!
Also this assumes that Mazrui and Horizon (who have been voting with SF and are roughly 20%) will benefit elsewhere with SF to the tune of 22p/share (if they are not dumb, they would have asked for more). So that leaves screwing the remaining 50% of shareholders to drive the company into bankruptcy to pick up assets on the cheap that you are not sure of? Possible, but odds are low
Along with what AA2020 pointed out, the other options are:
1. Renegotiate with banks to avert bankruptcy (banks already said no, but that will always be their stand) . In this case, frustrate existing shareholders and they come back and bid at lower price in June 2021. In this case, you should also assume that nobody else would come and bid for the asset at a higher price before that :)
2. Reverse merger with SF creating a stronger company (why wasn't this presented to the board already?)
3. Buy out remaining shareholders at 22p
4. Capital raise from SF at dilutive valuation (again they have to compensate/pay Mazrui and Horizon elsewhere)
5. Hope and pray that ADQ crashes this party
If you know the outcome, you will either sell down completely, or load it up to the hilt
Gruff, you possibly have a better idea of how many sharks might be circling in the water around GMS and I truly hope you are right when you hope for something sensible to be the outcome. Personally I've seen very little sense in what SF have done recently (e.g. hokey kokey with the board). I've sold my meagre holding for a small loss, but will continue to watch with interest.
Potentially a risky strategy, as they would not be the only interested party in the asset sale, plus they would lose their equity investment along with their co-voters, who apparently are voting completely independent of each other!!! Sure.
I hope they come up with something sensible at the end of Nov and we can all move on. They're just too disruptive for this to be the BOD turnaround story I had hoped it would be 18 months ago.
I suspect SF will be happy to see GMS fall into the hands of a liquidator and then pickup the assets / business commitments for peanuts. I have to say the way that SF have handled this leaves a nasty taste.
27th or 28th November I think
Anyone remember what the date is that SF are free to put in another bid? Assume they want their people on the board in advance of this date - if bidding remains their strategy that is
50.2% of outstanding shares voted against the warrants. Next one on board changes is on the 10 November.
Will they call another General meeting to reinstate Heikal onto the board? SF is keeping board/management busy by calling general meetings :)
Agreed that it was the SF shake up in 2019 that lead to the mgmt changes - I did vote for them last year to get them on the board.
However, their moves this year have been nothing short of hostile, opportunistic and predatory, and intended to cause 'disturbance' as you rightly said. If they can add value, they haven't made it clear it will be for the benefit of everyone. Rather, they are keen on snapping up GMS or its assets on the cheap to add value at SF.
Will be interesting vote on 10 Nov. Mazroui & Horizon hold the trump card
@4C - in terms of why the 2 SF reps resigned from the Board (with one requisitioning within an hour to get back on), it's difficult to assess. But one has to assume it's part of a rational tactic and strategy. I suspect it's either to cause further governance disturbance (as GMS has itself postulated) in order to make it more difficult for GMS to raise fresh capital (...except of course fresh capital from SF). Or it might be for some procedural purpose to make it easier to raise fresh capital from SF (e.g. by possibly reducing some of the conflicts of interest, making it relatively more "arms-length", etc.). Either way, with SF indicating they will not support the issuance of the warrants, I think what is going to have to happen over the next few weeks is SF and GMS are going to have to get together around the same table and finally have some grown-up, sensible negotiations on the path forward. I think MAN Capital and SF are clearly in the driving seat now, although GMS isn't completely powerless. Everything I've read and come across about MAN Capital and the Mansours suggest they have a somewhat different style than your classic, ruthless, short-termist, a**hole private equity players, so I suppose that is positive, but then again interviews/public info can be deceiving.
More broadly, I do think SF have value to add to GMS. Kudos to the GMS management for turning around the business and cutting costs, but more can still be done and it was achieved by GMS partly only by the prodding of SF since early 2019. The OSV market is fragmented and a tie up between SF and GMS would make a lot of industrial and financial sense and deliver some juicy synergies. The market needs consolidating, which would in turn (and in time) bolster day rates. Better yet would be a three way tie up between GMS / SF / Zakher Marine.
Also, thanks for the .kvk.nl link. Agree, I wouldn't pay any money for that, especially as I suspect it would only have various subsidiary level documents (less useful) rather than the more useful group consolidated accounts which, as the company is registered in BVI, are publically unavailable.
@AA2020 - any thoughts on why the 2 Seafox reps resigned from the board?
Just wanted to correct on HH's "significant shareholder" - I misread that one. He is not a significant shareholder, so we won't have the Sokol scenario
Your scary scenarios freaked out someone and he/she slammed it 7% :)
Yes, Man Capital seems like the main shareholder, and most likely Qatari/GCC investors too. Their board rep Hisham Halbouny also appears to be a "significant shareholder" in GMS personally (as per GMS bio); let's hope its a case of David Sokol/Lubrizol/Buffett.
SF is a Netherlands company.....surprised you haven't thought of www.kvk.nl since you seem to know lot already. Costs about 50 shares in GMS to buy a document - I'd rather buy the shares than learn about SF. The Man of Isles also has similar registry in case your research leads you there. If you find something, please do share your knowledge along with the scary scenarios
Very interesting 4Corners. I didn’t realise MAN Capital were shareholders in SF. All I was previously able to find was vague wording that SF shareholders comprised a range of GCC investors including a SWF, regional family offices and regional HNWIs. So MAN falls in the regional family office category. I wonder though what their precise shareholding level is and also which SWF is invested. Public info dried up after the repayment of the senior secured bond which was traded on the Irish exchange in 2018. The prospectus for that bond (issued in 2013) is freely available as are numerous bond investor presentations and SF financial accounts which are all very interesting although a bit out of date now (last available I could find was 2016). I didn’t for instance previously know MOS was set up by Och-Ziff and Mike Mullen.
Re: the scenario of a forced $75m fundraising from SF and friends at 1p....on further thought this would require at least 75% shareholder approval so is pretty unlikely to happen. Even if they have full Board control. Other shareholders would have a clear case that the Board were not fulfilling their fiduciary duties to all shareholders. But for sake of argument if that was the path this went down, Mazroui and Horizon would benefit if they co-fund the newco alongside SF from which the $75m was sourced. But then that likely proves “acting in concert” so should fall over. So several mechanisms thankfully appear to prevent this theoretical 1p fundraising scenario.
Seafox has made it abundantly clear through their actions that they want to create some sort of value for Seafox at the expense of the 70% owners of GMS. Just so that we are clear, I don't think its Seafox in the driving seat; it is Man Capital, which is a PE style Egyptian family office in the UK. Perhaps there is some backing from Qatar, as Seafox debt is financed by Qatar Islamic Bank. Seafox/Man Capital doesn't have to clarify anything - as PE investors they are looking out for their own interests, and unfortunately they may not be breaching any regulation.
@AA2020 - you continue to point out scary scenarios. At 1pence a share, I bet there are other interested parties. Hell even i am tempted and we could even convince @mcent to top up on his 700k shares :). Is this scenario possible without a new board, which needs Horizon and Mazroui voting in line with SF (which possibly makes the case for 'acting in concert')? And assuming there is no 'side agreement' between the three, Horizon and Mazroui would be losing out if this happens. Alternately, why not let the current board do a rights issue at whatever price, and SF can underwrite the issue and increase ownership without triggering an MTO and retain control?
The thing that worries me most is that Seafox haven’t made their intentions clear. What are they planning? Why don’t they at least try to get PIs on board and convince us of the merits of their plans? All they’ve done to date is criticise the BOD and their track record. They’ve castigated them for implementing their turnaround plan yet offer no alternatives. They are aggressively disruptive and I remain unconvinced that they are acting in the best interests of all GMS shareholders despite having board representation. I’m fearful for my investment here too. But grateful I haven’t got anything like 700,000 shares!
A scenario which worries me is that SF can now essentially say to GMS: you are obligated to raise $75m, you do so from us and we set the terms. Otherwise it’s administration. So SF play hard ball and force GMS to raise $75m from them at 1 cent a share, thereby issuing 7.5bn new shares. SF then owns 97% of the company and then forces a squeeze out and de-listing. I don’t see mechanically what is to stop them from that.
Lufc - you need to email the corporate actions department at HL and give them your vote, otherwise it defaults to the board proxy. Same with most SIPP etc providers to save them having to request votes for every corp action.
I hold via HL and want to vote has anyone managed to do this and if so how? I have looked at the HL account and cant seem to find a vote button on the site?
Any help would be appreciated.
Looks like you know: 1.SF's capital structure, and 2. that its better than GMS :)
Good point 4Corners. Definitely more than just those three end games. The merger scenario is interesting. I wonder if SF would look to force a reverse merger similar to the current situation with Premier Oil and Chrysaor. It solves the capital structure issue and no doubt would bring material synergies and greater tendering / business development heft. It could conceivably be of benefit to all shareholders in the medium term. Although this would depend on SF wanting to retain the GMS listing for the combined entity.
Either way I think (or rather hope) it’s unlikely that the SF game plan is to intentionally push GMS into administration in order to buy the assets. It would be pretty risky with no guarantee of success and it’s not obvious how Horizon or Mazroui would benefit.