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Wellard vote to determine fate of Ocean Swagman sale

James Nason, 26/09/2019

The MV Ocean Swagman

THE fate of the US$22 million sale of the MV Ocean Swagman by Wellard Limited to Heytesbury Cattle Company will come down to a shareholder vote to be held next month.

Shareholder approval is required for the sale and leaseback deal to to proceed, as the buyer is a major shareholder and therefore a related party.

In a statement to the ASX on Wednesday Wellard Ltd said a general meeting of shareholders will be held to vote on whether to approve the transaction at 1/a Pakenham Street, Fremantle, WA, on Friday, 25 October 2019 (link to meeting notice and explanatory memorandum here).

Heytesbury Cattle Co, which is both the buyer and a major shareholder of Wellard Ltd, cannot vote at the shareholder meeting.

The vote will decide once and for all the fate of a transaction that has already taken a number of twists and turns.

Following an initial announcement in early July that Wellard was selling the Swagman to Heytesbury, a subsequent announcement indicated Wellard was negotiating to sell the vessel to another potential buyer, after Heytesbury did not complete due diligence by an agreed deadline.

But then on August 20 it was revealed the sale and leaseback deal with Heytesbury was back on the table.

The Wellard Board is urging eligible shareholders to attend the meeting or to lodge proxies, and is unanimously recommending that shareholders vote in favour of the proposed resolution in the absence of a superior proposal.

But just when it appeared the deal was guaranteed some final smooth sailing to get across the finish line, the waters have been made a little choppier by the inclusion of an independent expert’s (IE) report included in the Notice of Meeting.

The IE’s task was to assess if the sale and the leaseback plan was fair and reasonable.

It found the sale was not fair – because the US$22m price was slightly below the value range and independent valuer placed on the vessel US$22.8-$25.2m – but reasonable due to Wellard’s need for the money.

However it found the leaseback terms were both fair and reasonable.

While a valuer looks solely at the dollars received versus a valuation when assessing the fairness of a price, the Wellard board has made the point in its recommendation that the IE report did not take into account the value that Wellard can generate from the leaseback and use/chartering out of the vessel.

“Irrespective of the sale price being below US$22.8 million (i.e. at  the low end of the assessed fair market value price range of the Independent Expert and Weselmann), the Board believes that the following are compelling factors which outweigh the sale price being below assessed fair market value price range:

  • the  Company  will  earn  revenue  from  the  vessel  during  the  charter  period, representing an opportunity for ongoing benefit, which has not been taken into account when assessing the fair market value of the sale price of US$22m;
  • the low number of sale transactions relating to specialised livestock vessels;
  • the closeness of the sale consideration to the fair market value price range;
  • the low likelihood of another offer on the Swagman emerging; and
  • the generation of free cashflow from the proposed Transaction,  which will allow the Company to meet debt commitments”


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