Norway Royal Salmon suing NTS after blocking proposed share issue

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Fish farming company Norway Royal Salmon (NRS) is suing aquaculture company NTS for compensation after accusing the company of breach of contract for blocking a proposed share issue at an extraordinary general meeting on 7 April.

The independent board of NRS has assessed the situation after NTS voted against a proposal, preventing it from being approved.

“The share purchase agreement between NRS and NTS contains a clear and express provision requiring NTS to be represented at the general meeting with all its shares in NRS and vote in favour of the share issue,” a statement from NRS read.

“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 stated, announcing the lawsuit.

NRS is 68 percent owned by NTS.

Dialogue
“NRS has throughout the process sought to maintain a constructive dialogue with NTS, and has been open to discuss alternative solutions. 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.”

The NRS board believes that the company’s shareholders have now suffered a significant economic loss.

“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 law suit against NTS claiming damages for breach of contract.”

NTS stated that, following the share purchase agreement dated 11 January, NTS was obliged to vote for the issue.

At the general meeting and in a separate stock notification, NTS justified the breach of this voting obligation on the grounds that the freedom of action of the board of NTS is limited as a result of section 6-17 of the Securities Trading Act.

Violation
“The independent board of NRS does not agree with this. In the share purchase agreement of 11 January, NTS undertook a legally binding obligation to sell the shares in SalmoNor and to vote for the issue. At this time, no bid had been made for the company. The fact that bids were made for NTS after the conclusion of the agreement does not prevent NTS from fulfilling its obligations under agreements already entered into, and does not give NTS any right to withdraw from its obligations. The independent board therefore considers that NTS ‘voting at the general meeting on 7 April was a breach of the share purchase agreement,” NRS said.

NTS has now convened a general meeting to decide whether an exemption should be granted from the Securities Trading Act § 6-17.

“NTS has had the opportunity to convene such a general meeting at any time from the first bid for NTS was announced on 17 January, as NTS already at this time, based on the interpretation of § 6-17 which they now invoke, ended up in a situation where they could not fulfill their obligations under the SalmoNor agreement. NTS has at no time communicated to NRS that such a general meeting could be an alternative. NTS has instead chosen to wait to send such a notice to such a general meeting after the issue had lapsed as a result of NTS ‘voting at the general meeting on 7 April.”

Condition
“Given that more than 50 per cent of the shareholders in NTS have undertaken to accept the offer from SalMar, which has the condition that neither the issue nor the sale of SalmoNor is carried out, it also does not appear realistic that the general meeting of NTS will support an issue in NRS. In any case, it is not acceptable that the question of whether NTS should comply with a legally binding agreement should be the subject of a vote at NTS ‘general meeting.”

The private placement in NRS, which was placed on March 30, has lapsed as a result of yesterday’s general meeting decision.

“Whether the Salmonor transaction will still be feasible is therefore uncertain. A loss of Salmonor transaction will result in a significant financial loss for NRS. Even if it should be possible to complete the transaction at a later date, a postponement until after SalMar has completed its bid for NTS will have significant negative consequences for NRS and its shareholders. From an operational perspective, a prolonged delay in the execution of the transaction will be very unfortunate. A postponement will also entail a significant market risk associated with the issue, which must be completed and lead to the minority shareholders losing the opportunity for a generally mandatory offer in the event of a change of control in NTS,” the NRS board writes.