Ocean Wilsons (holdings)... Share Discussion Threads

[samsj] 26/8/2024 18:34

"There is no way the vast majority of minority shareholders in OCN are going to accept non-voting ones that's for certain & I wouldn't take voting ones either, given what everyone knows about the HANSA funds past performance."

I hope so, LOTM. My question is though: strictly, in law, do OCN minorities have any say? From what I understand you have 0 say under Bermuda law:

"The statutory threshold for approval of an amalgamation by the target...can be reduced to a simple majority by an appropriate provision in the bye-laws of the target. If the bye-laws of the target contain no such provision, the bye-laws can generally be amended with board approval by a simple majority vote of the shareholders so that there may be potential for an amalgamation or merger to be approved by a simple majority vote. "

[last of the mohicans] 26/8/2024 18:31

xxx,

A good summary I'd say.

I understand your point about the buy back increasing the 2 families interest in OCN even further.

However they have control of it now, so adding very slightly to that % is not going to affect what they can or can't do with the company. If it was pushing them close to 75% ownership control then I'd be agreeing with your view instead.

(Just for context - Lord Ashcroft owned 62% of IPEL which was in takeover talks for over a year, They still carried out a share buy-back program, which enhanced the offer that was put on the table, the deal was done on his terms & we either got to accept it or sell our shares onto the market at the price available. There buy-back was dilutive because the price being paid for them was well above there actual asset value, OCN is completely the other way round)

A buy-back at £16 per share or under both increases the TNA-Value retained within the business, the EPS number & the dividend paid out per share for the same cash sum.

As an example.

If we said the true value of the Wilson & Sons holding per OCN was either £19.50 (R$20) or £21.47 (R$22) or £23.42 (R$24) or £25.37 (R$26) with £7 for the Investment portfolio part.

Then for each share bought in at £16 the business retains either £10.50, £12.47, £14.42 or £16.37 of value after it is purchased.

So if they bought in 100,000 shares that means £1.05M, £1.247M, £1.442M or £1.637M of added value.

With 500,000 shares that means £5.25M, £6.235M, £7.21M or £8.185M respectively & pushes up the TNAV by either £0.148, £0.176, £0.203, or £0.231 per share & the dividend per share would have gone up from £0.67 per share to £0.68

LOTM

[varies] 26/8/2024 15:55

xxx
Might a solution be for Wilson Sons to take over OCN ?

[xxx] 26/8/2024 14:04

Pleased to see a debate here. LOTM has provided a lot of colour over the years and pointing to the growth inflection is helpful. I have to say that i agree with much of it.

To summarise:

1/ I hope we can agree that the investment potfolio side of OCN has had poor results for an extended period and looking at their holdings, it is difficult to see this changing [also see running costs].

2/ Brazil is growing via trade and Wilsons is a major beneficiary, which is geared to the Brazilian economy.

3/ We have not seen the full benefits of the investment that Wilsons has made

4/ If a bid comes [Dubai ports anyone?] we will have 1 opportunity to exert influence.

5/ Some people are concerned about tax. [This could be obviated by making returns of capital rather than income.Also Rachael Reeves will 'fix' this]

But fundamentally do I want to own a great asset in a growing market or a multitude of duff collective funds run for the benefit of other families by unsuccesful members of the clan...or worse still, they sell the Wilson's stake and further invest the proceeds eek!

ps. Whilst understandable from the arithmetic, I am against a buyback as this would only further cement the incumbent's hold on OCN.

[last of the mohicans] 26/8/2024 11:37

samsj,


I'm sorry but there is simply no way an all share merger is going to take place between HANSA & OCN.

HANSA has 40M voting shares & 80M non-voting ones.

There is no way the vast majority of minority shareholders in OCN are going to accept non-voting ones that's for certain & I wouldn't take voting ones either, given what everyone knows about the HANSA funds past performance.

LOTM

[samsj] 26/8/2024 11:03

Tidy for whom? For us, yes but how so for the vendor or buyer? Why would an infrastructure fund want to have to deal with eg. the £48m of PE commitments and possibly other things to wind down?

Surely the tidiest solution is an all-share merger of Han and OCN and they throw us say 20% of the sale value in a dividend. They keep a massive pot of money to charge management fees on. In that scenario, what is the upside even with a good sale price? Very little by my calcs if discount persists.

I hope that doesn't happen but is a real possibility, no? The answer to this puts this in a range between 0% upside to 100% upside on a sale by the end of the year. And you don't want to discuss it because it's "paranoid"?

[varies] 26/8/2024 10:40

I still maintain that the tidiest solution would be for a bidder to buy OCN rather than its holding in Wilson Sons. The investment portfolio should be easy to liquidate as it is essentially a fund of funds.
Some shareholders might prefer cash and others might prefer securities issued by the purchaser and l hope we may be offered a choice.
It may be, of course, that no deal will be struck in which case we must hope that the prospects for Wilson Sons are as bright as some have suggested.

[pockstones] 25/8/2024 20:09

Hmm it might suit all concerned to achieve the highest price possible for Wilson’s and treat all shareholders equally ?
This debate is getting paranoid

[samsj] 25/8/2024 18:44

Thanks. I see I didn't have the Victualia Ltd line.

Long story short, we are completely at their mercy - they don't have to make it appealing to minorities at all if it doesn't suit them, maybe City of London or someone can apply some social pressure but that's it? UK minority shareholder rights are irrelevant.

Are we hoping that it just doesn't make sense for them to maintain a (hopefully redundant) OCN listing and they consolidate to Hansa? And tax is ok because they have everything set up in Bermuda now? (4 July 2019 RNS: they changed Hansa to Bermuda with some bs excuse about UK political instability)

Are the articles of association etc available on internet?

[last of the mohicans] 25/8/2024 16:52

samsj,

Thanks that was a good read & the early Santana route ships are doing around 1000 TEU's each, but the route still hasn't settled down yet & got into a full natural flow. Then you have to work out the added benefits you get, of not only unloading the ship but how much is then onboarded to other ships sailing to other North Brazil ports & conversely being brought to Salvador to then be unloaded & reloaded on to the Santana route.

Give it a couple of month's & we will get a much better idea of its true benefit to the business. It might force Wilson & Sons to fill in the back area behind the extended 800M berth much soon than they had planned simply to keep up with demand capacity.

That's what we are already seeing at RG in the container numbers on the FIL route.


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The 2 controlling families own a combined total of over 51% of OCN.

Firstly you have there direct interest in OCN itself.

Secondly they are directors of HANSA & the families own just over 50% of the HANSA voting shares.

The company has special rules whereby there are only I think 4 or 5 holdings of OCN shares that are allowed to be above 5% if anyone else crosses that threshold they are force to sell them back into the market.

A poison pill of kinds.

Apparently its to do with the LSE listing / Bermuda rules for tax purposes, but serves the families very well with there cosy arrangement.

LOTM

[samsj] 25/8/2024 14:12

I guess cynics who say minorities won't see much even if there is a deal will have their own answer to that...

Here is another recent article which gels with some of what you're saying:
correio24horas.com.br/agenda-bahia/eu-diria-que-a-palavra-e-protagonismo-avalia-diretor-do-tecon-0824

I'd like to look into this in a bit more detail but fear I don't have the expertise.
You mention a special resolution and 75%... But anything will happen under Bermuda law, no? This is the sort of thing which concerns me...

"The [Bermuda 1981] Companies Act contains no specific restrictions on the power of the directors of a company to resolve to dispose of assets of the company although it specifically requires that every officer of a company, in exercising his powers and discharging his duties, shall act honestly and in good faith .... Class actions and derivative actions are generally not available ... under the laws of Bermuda"

Insiders control around ... 38-40% or more? Do you think City of London etc are at all engaged here and able to organise anything if necessary?

[last of the mohicans] 25/8/2024 11:51

When you think about it, lets say they are talking 24 Real a share, which is roughly £3.33 for each Wilson & Son share or £23.40 to each OCN share (not including the investment portfolio value per share).

Why on earth are they not using the 2 dividend's they've already received from Wilson & Sons to initiate a non-discretionary share buy back of say £15M intended to be completed before the end of 2024, at a price of up to £16 per OCN share.

Every time the share price is under that the broker mops up what they can from the market.

It enhances both TNAV & EPS & it would be described as accretive from the off!

LOTM

[last of the mohicans] 25/8/2024 10:35

Hi samsj,

Yes people need to really look at the data & its effect ....

download the 2nd quarter results & look at the container terminal numbers.

1st half TEU's were up 25% but EBITDA jumped 47% because of the gearing effect of the high fixed costs associated with them. As volumes go up the cost per move goes down & the effect only amplifies as you get closer to full utilisation of the terminal.

If you look at the latest Presentation page 4 you'll see the overall EBITDA number's its taken 12 years from 2011 to 2023 to go from $152M to $206M - that's 12 years for a 33% increase.

Only now is the number starting to increase significantly which in turn ups the value of Wilson & Sons.

I'm not sure given the performance improvement (volume) & exchange rate that they'll be settling for anything under Real 24 & its more likely north of 25 that might force there hand a bit.

The 2 family's will have a lot to take into account, OCN's tax position, their own tax position, but also that of HANSA as well.

And while they won't like it they will have to make it appealing for the minority of OCN to go along with it, otherwise it could turn into a right botched job!

LOTM

[samsj] 25/8/2024 09:45

Some press clippings on Bradesco price comments from before:

- Mentioning "R$19.90 to R$25.60":

infomoney.com.br/mercados/wilson-sons-port3-controlador-confirma-que-avalia-venda-de-investimentos-na-companhia-desempenho-acoes/

- When they downgraded to hold because "The share price is assuming a 57% probability of the deal closing at R$23"
braziljournal.com/bradesco-bbi-rebaixa-santos-brasil-e-wilson-sons-reitera-compra-nas-locadoras/

And we have the recent cryptic comment that "Both external factors and the excellent performance of Wilson Sons are playing into these considerations." Which you can put a more positive or negative spin on.


Great info LOTM thanks - I'll need to look back at your old posts to get an idea again of what minorities can realistically get out of a deal then and how they'll likely structure it and what their tax advisers are likely telling them. (Unless you are willing to put a new summary together!)

[last of the mohicans] 25/8/2024 08:50

joedjoed,

I think you've got this all wrong.

Wilson & Sons share price never fell back as much in terms of the actual quoted share price since the first review announcement a year ago, whereas OCN's price did drift back a lot more.

In the meantime the price of the Brazil Real has fallen over 10% to both the $ & £.

So the market value of Wilson & Sons now is less than it was before ( a year ago) in $ terms. It didn't rally as much because people have realised that Wilson & Sons have no control or input into what's actually going on. Its OCN who will decide if they will agree a price for there @ 57% interest in the company with a buyer or not.

If they agree such a price then those who hold Wilson & Sons shares directly will have the chance to accept the same price for there holding or not. So the Buyer might end up with OCN's @ 57% holding plus say another 20% of acceptors & possibly a big enough rump of shareholders who don't think the offer is good enough & refuse to sell out at that price!

Alternatively a buyer if they think OCN are asking to much or want to gain leverage over the situation could enter the market & buy up Wilson & Sons shares there & make an on-market offer for the whole minority 42% interest ! again this might or might not be accept by those other shareholders.

---------------

Why do you think there might be a narrowing of the discount?

Its more likely to widen given the discount HANSA trades at to its full look through value.

The dividend & therefore yield would be much lower than it is now for OCN & who's going to want to invest in that ?

HANSA isn't big enough or have enough free cash to buy up OCN even if it wanted to & I doubt many current OCN shareholders would want to own HANSA shares that's for sure.

LOTM

[joedjoed] 25/8/2024 06:58

I'm missing something here: if OCN has rallied in expectation of a bid for OCN's majority holding in Wilson and Sons why hasn't Wilson and Sons' share price in Brazil itself rallied more?
I think there is an argument that there are two mechanisms at work to the benefit of OCN: one being the premium a buyer would pay, the other being an expectation of a narrowing of the discount but would not the former impact the quoted Brazil price too?

[last of the mohicans] 24/8/2024 22:29

I think some of you are getting a little confused here, the offer if it comes isn't for OCN but for its subsidiary Wilson & Sons.

If OCN accepts the offer ( & then OCN shareholders vote to accept it also)

Please note it might require 75% shareholder approval rather than just 50%, if its a special resolution etc & Ordinary shareholders should pray that, that is the case as that's about the only time we will have some leverage & power against the 2 controlling family's majority control & thus force them into certain concessions that they normally wouldn't make, like paying out a certain amount of cash per share, share buy-back programs etc, that they have failed to entertain for years now.

The last thing us minority shareholders want is for Hanseatic to be involved in any way of managing the assets so that the 2 family's, their decedents, close relatives & there friends can keep drawing off their annual management fees & bonuses so that they all have nice salaries at our expense, while all we get is a terrible performance on the assets.

Those here long enough will regret ever agreeing to float 42% of Wilson & Sons in the 1st place in 2007. A move that has cost everyone collectively north of $300M and counting since then.

Having OCN still existing & trading at something like a 40% discount to the underlying value (if a transaction does occur) does none of us any good that's for sure.

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As for the value of Wilson & Sons - well most of you don't seem to have grasped the transformation of the business that's occurred in the past 12 month's on the 2 container terminals.

They are in a massive growth phase that many of us have waited years to see & this will make a significant difference to the company's bottom line going forward. you've only just caught a glimpse of it so far.

The new route at Salvador (Santana) which is only just starting up, looks like it is going to be adding 4,000+ TEU's a month to the numbers alone that's like 15%+ of the monthly number plus the other routes are seeing much more volume to.

At RG the new (FIL route) which has been going for under 3 months & its feeder ship have been adding around 6,000 TEU's a month to the numbers (up to 20% of volume)consistently & if the latest weekly visit numbers are maintained that number is going to rise to well north of 8,000 a month.

A 2nd new service is just starting up but there is no visibility on it as yet to say what the numbers might be like.

But combined if your looking at the annualised numbers we're about to jump from just over 1M TEU's for the year to about 1.3M+ & still rising rapidly & that is after several years of hovering around the 900,000 to 1M annually.

RG has not been doing much better than break even for years now because of fixed costs being such a large part of the container terminal business. Its now about to go from under 50% utilisation to over 60% (and if you adjust for the new routes & the flooding at the start of May the real figure is probably very close to 70%).

Hence where the surge in profits is coming from.

Which in turn boost the value of Wilson & Sons if the same PE multiple is used etc.

You also need to remember that Wilson & Sons invested over $1 Billion in the business in just a 5 year period & has had to wait quite some time to start getting a decent return on that money.

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OCN owns 248.644M shares of Wilson & Sons, Friday's closing price of PORT3 was Brazil Real 17.40 with roughly 5.50 to the $ that equals $3.16 which in turn equals £2.41. So that values OCN's holding at £600M

That then translates into £16.98 per OCN share.

I don't think that price truly reflects where the Wilson & Sons business has got to. I think any offer would have to be north of Real 20 (£19.52 per share) to get the family's interested & I think a year ago the figure of Real 22 (£21.47) was being mentioned.

LOTM

[joedjoed] 24/8/2024 22:27

5 bn is a premium to the value implied by friday's Brazilian close which would be 4bn. Needs to be a premium to make the deal attractive to OCN and justified as it provides a majority stake.

[flyfisher] 24/8/2024 18:51

From NOV 2023.

''According to Bradesco, MSC is negotiating the purchase of 57% of Wilson Sons in a transaction of approximately R$ 5 billion.''

At current fx rates that would be $910m or £19.48 p/s prior to any taxes to OCN.

Of course the current interest could be at a premium or discount to that.

I wonder what MSC think of it?

[varies] 24/8/2024 17:22

I mean that I would prefer OCN to keep its holding in Wilson Bros unless we can be offered a deal that is more attractive to UK taxpayers.

[meanreverter] 24/8/2024 17:16

On page 15 of the interim report, in the consolidated accounts, the equity attributable to the holders of OCN is $587.194m. There are 35,363,040 OCN shares in issue. So the asset value per share is just over $16.60, or about £12.59 at the current exchange rate.

It's arguable that the book value of Wilson Sons (WS) is unrealistic, and instead we should consider the market value of the shares. According to Yahoo Finance, the market cap of WS is BRL7.615bn, or $1388.345m. In the consolidated accounts, the asset value of WS attributed to the 43% non-controlling interests is $202.617m. However, the market value of these interests is $597m. Accordingly, by this measure, the value of OCN's 57% stake should be boosted from (57/43) × $202.617m to (57/43) × $597m: that is, we should augment the nominal $587.194m NAV of OCN by $522.787m. This would give OCN a NAV of $1110m, or a per-share value of $31.39, equivalent to £23.80 per OCN share.

This looks too high. I have no qualifications in accountancy; so the above calculations should be treated with suspicion, and they may well be wrong.

Edit: The 57-to-43 ratio is taken from the 2024 interim report. However, after digging through the 2023 annual report, on page 70, I found the more accurate figures: namely 56.52 to 43.48. Re-doing the above calculations using the more precise ratio reduces the OCN NAV per share by about 1% to £23.55.

[varies] 24/8/2024 17:15

joedjoed
There are 35.5 million shares in issue rather than 355 million.
Supposing OCN sells its stake in Wilson Sons for £550 million and distributes the whole sum as a special dividend (as you suggest), then we stand to receive £15.49 per share as taxable income.
Tax at 40% reduces this to £9.29.

If the remaining assets are worth £279 million, this is £7.86 per share. Applying a 20% discount reduces this to £6.29.
So for a 40% taxpayer this arrangement would yield only £15.58 per share.
On these terms l would prefer to keep my OCN shares.

[joedjoed] 24/8/2024 16:35

Me again
These discounts are not really an intuitive way to look at it. The formula I used was (NAV per share - actual share price)/NAV per share.
If you look at it another way, the share price needs to rise by 60% to reach NAV.

[eezymunny] 24/8/2024 14:39

We can only guess what the Wilson Sons stake might go for. Joedjoed has stuck in the market cap on the Brazil stock exchange.



No idea if the above link accurate but suggests current PORT3 market cap gives EV/EBIT of 14. Make your own mind up how much upside there might, or might not, be to that :)

[joedjoed] 24/8/2024 14:12

I don’t see a 1bn total value, Allstar_7. Let me know where we differ:
OCN has 3 elements: its holding in Ocean Wilsons and Sons (OWS) listed in Brazil, investments through Ocean Wilsons Inv Ltd (OWIL) and cash.
The three elements are as follows:

OWS: OCW owns 56.52 % of OWIL. At Fridays closing and using Fridays FX rate that is worth 56.52% of mkt cap of GBP 974 mln = GBP 550.60mln

OWIL: at the March update the portfolio was valued at USD 322.8. As a seat of pants estimate lets say that is now 330 USD. This is = GBP 259.84

Cash: as the March update the cash was USD 25.8 = GBP 19.55

Total is 550.6+259.84+19.55 = 829.99.
This is lower than the March position as the Brazilian real has weakened and the OWS share price has weakened.

There are 355.36mln OW shares in issue. This means NAV per share is 23.47 vs share price of 14.60 at Friday close. This is a discount of 37.8

To Varies: I don’t see your angle. Surely if OW disposes of OWS it will receive cash which it would payout as a special dividend.