Greek containership owner Danaos, the largest shareholder of Eagle Bulk Shipping, with ownership of approximately 16.7% of the outstanding shares, has issued a letter to the board of directors of Eagle Bulk in response to the company’s repurchase of Oaktree Capital’s 28% stake in the company.
Danaos said in a letter addressed to the board of directors of Eagle Bulk Shipping that it was a surprise to see the announcement of the company’s recent repurchase of Oaktree Capital’s entire 28% stake in the company, at nearly a 35% premium to the company’s 45-day average share price, and its decision to adopt a “poison pill”, as it is said by Danaos, without seeking prior shareholder approval.
“It goes without saying, these transactions fundamentally alter the makeup of the company,” the shipowner mentions.
The Greek company complained that as a result of the repurchase of Oaktree’s shares, there are 9,283,499 common shares outstanding and Danaos now own 16.7% of the Eagle Bulk Shipping shares, an increase from the approximately 11.3% purchased in open market transactions.
Danaos also explained that it is now prohibited from purchasing any additional shares without triggering the company’s recently adopted poison pill.
“Since these actions were taken by the Board, Eagle Bulk shares have declined by nearly 6%, which appears to provide a preliminary assessment of the market’s reaction,” says the Greek shipowner.
The Greek firm expresses its concern that “the share repurchase and preferential treatment afforded to Oaktree exposed Eagle Bulk’s remaining shareholders to unnecessary strategic and financial risk.”
On the subject of the poison pill, Eagle Bulk described it as reducing “the likelihood that any person or group gains control of the company through open market accumulation, or other abusive tactics potentially disadvantaging the interests of all shareholders, without paying all shareholders an appropriate control premium or providing the company’s board of directors sufficient time to make informed decisions in the best interest of all shareholders.”
Danaos said that practically they were the only shareholder that is now effectively prohibited from purchasing any additional shares.
“Our intention has only been to work collaboratively and constructively with the Board and Eagle Bulk management. We informed management of our intentions before purchasing our shares in the open market,” Danaos says.
The shipowner wanted an explanation on how an open market purchase followed by a prompt 13G filing constitutes an “abusive tactic especially in light of the Board’s preferential deal with Oaktree,” as it is characteristically said.
The company also questioned “how the poison pill truly accomplishes the Company’s stated goal of avoiding “abusive tactics” and are concerned with where the share repurchase and poison pill leave us as well as the Company’s other remaining shareholders.”
Danaos said: “it is also peculiar that the Board is only now adopting this poison pill (which is triggered at 15%) given the fact that Oaktree was long permitted to maintain its significant 28% stake without a similarly threatening response from the Board. Oaktree is a $164 billion enterprise with control positions in multiple public shipping companies. They have the knowledge and means to acquire the Company, but no poison pill was in place to prevent them from doing so.”
“Given our extensive knowledge of the shipping industry, we feel that we must be able to communicate our views with the Company’s shareholders at large to facilitate growth in shareholder value. The Board’s defensive measure to adopt the poison pill without seeking the prior approval of shareholders raises the question of whether the Board is truly acting in the best interests of stockholders. We can’t buy more stock, and the Company seeks to curtail our ability to share our opinions absent a public forum,” Danaos stated.
Source: Danaos Corporation