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Scottish Salmon Company shareholder criticizes terms of Bakkafrost offer

Minority shareholders are worried of being squeezed out on less than favorable terms.

Scottish Salmon Company (SSC) minority Norwegian shareholder Arild Johansen says he should be offered the same terms as the private equity shareholder Northern Link for Faroese salmon giant Bakkafrost's acquisition of the Scottish salmon farming giant.

Johansen, a committee member of Norwegian investment vehicle FMG Funds, proposed a different corporate governance scheme that would align minority shareholders with Northern Link's deal with Bakkafrost.

"Bakkafrost should offer the same terms to minority shareholders as given to Northern Link, improve its offer price to minority shareholders, and SSC should offer minority shareholders a special dividend now before the mandatory offer squeezes [them] out," Johansen told IntraFish.

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Bakkafrost announced the final offer price for common shares on Nov. 8 of NOK 28.25 (€2.80/$3.10), the highest price paid in the last six months.

However, Bakkafrost announced it completed the acquisition of 133,125,109 SSC shares from Northern Link in October for NOK 3.76 billion (€374.2 million/$411.1 million) or NOK 28.20 (€2.80/$3.10) per share.

'The mathematics are simple'

"The purchase price for a controlling stake in SSC was so attractively valued for Bakkafrost that their shares shot up in price in subsequent trading on the Oslo Bors even after such a highly dilutive private placement was made at a substantial discount to market price," Johansen said, who has been a shareholder for the last decade.

Usually, companies acquiring another company see the opposite effect, with share prices taking a downturn for a period after the announcement.

SSC shares Bakkafrost bought from Northern Link are now worth NOK 35.65 (€3.53/$3.90) based on Bakkafrost's closing price -- a 25 percent gain for the company.

de844851c6807610b43a9d43f9dd025e SSC share price soars. Photo: Bloomberg Markets

"SSC minority shareholders have not been offered the same terms as received by Northern Link and will likely be forced to sell their shares or be squeezed out at an inferior price," Johansen said.

The merger between Bakkafrost and Northern Link offers additional benefits for the company, not only through the profitability of SSC but also from Bakkafrost underpaying the minority shareholders, Johansen said.

"Bakkafrost acknowledged the deep discount at which they sold shares to Northern Link and other insiders by announcing a subsequent repair issue to minority Bakkafrost shareholders who didn't get the same opportunity to buy Bakkafrost shares at the deep discounted price," Johansen said.

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'We want SSC to remain on the Oslo Bors'

Johansen said he sees far more potential upside for SSC shares on the Oslo Stock Exchange "given the very bullish outlook."

"With the stated growth, I see a possible doubling in the SSC share price over the next five years and possibly some material dividends on the way as well," Johansen said.

Johansen is not the only minority shareholder criticizing the transaction.

Edward Smythe, an individual minority investor, told IntraFish in September he wants to hold out against Bakkafrost's bid and sees a strong case for other minority shareholders to do the same.

However, Frode Teigen, a 6.3 percent stakeholder in SSC sold his entire stake of 12,300,000 shares on Sept. 27.

Liechtenstein-based asset manager Bonafide followed shortly after, selling its remaining shares in SSC to Bakkafrost, Managing Partner Christoph Baldegger told IntraFish at the time.

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