Isle of Scilly Ferry Rejects Takeover Approach from Harland & Wolff
Harland & Wolff Group has taken the rivalry with the management of the Isle of Scilly Steamship Company up a notch offering to buy the ferry operator after its designs for new ferries were rejected. The famed shipbuilding developed designs for replacement ferries for the company and later proposed possibly launching a rival ferry service after the Isle of Scilly Steamship Company selected a French shipyard to build its new vessels.
The ferry operator reported in a stock exchange filing yesterday, November 23, that it had “received and unequivocally rejected” a preliminary approach by Harland & Wolff regarding a possible offer to acquire the company through a stock acquisition. The company traces its origins back to when the residents of the Isles of Scilly which lies about 30 miles off the coast of England came together in 1920 to form a company to maintain transport services between the island and the British mainland.
Today, the company operates two small prop planes as well as a ferry built in 1977, a cargo ship built in 1981, a small interisland boat to move freight, and an RIB for mail service. The 46-year-old ferry provides a vital link for the islands carrying over 100,000 passengers and tourists annually. The only competition is a small helicopter operation.
The company went public this year with a plan to replace its existing vessels with custom-designed ships for the passenger and cargo services. The ferry company announced it would privately fund the work if the government did not agree to the proposal. They selected France’s Piriou to build the new ferry.
Harland & Wolff contend the route between the Isles of Scilly to Penzance is “significantly underserved,” according to statements from John Wood, CEO of the company. In August, he unveiled their designs for the new vessels and said they were considering a plan with government assistance to launch a competing ferry operation.
Harland & Wolff said in a statement in response to the Steamship Company, that it “believes there is a clear strategic, operational and financial rationale for the proposed acquisition in pursuit of this and is disappointed that the board of ISSCL unequivocally rejected this proposal. The board of Harland & Wolff continues to consider their options.”
The shipbuilder confirmed that it had made an indicative and preliminary approach (typical of how unsolicited takeovers begin in the UK) for a possible cash offer for the capital of ISSCL. It appears to be a thinly traded stock on the Asset Match system with monthly share auctions and a market value of approximately £5.7 million ($7.2 million). Harland & Wolff Group trades in London with a current market value of approximately £21 million ($26 million).
Commenting on the proposal the Steamship Company said its board “does not believe that the approach from H&W is in the best interests of the company’s shareholders.” The shareholders are “strongly advised” to take no action in relation to the preliminary approach from H&W at this time.
Under the UK’s Takeover Code, the confirmation of the approach triggers an “offer period.” Harland & Wolff is now required by December 21 to either announce its firm intention to make an offer or to confirm that it does not plan to proceed with an offer.
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