Argentine Business Interest in the Falklands: One down but another pops up.
The threat of an Argentine takeover bid against the Falkland Islands Holding Group (FIH), which owns the Falkland Islands Company (FIC), has receded in the face of firm opposition from the FIH Board and a gentle reminder of the licensing procedures from the Falkland Islands Government (FIG). But as one seems to have gone away, another pops up. An Argentine business magnate connected with the US Howard Johnson (HoJo) chain of hotels has resurrected his idea of building a hotel in Stanley.
The saga over the future of FI Holdings Group continues to rumble on see the Stop Press paragraph below on the Rowland family’s sell-out but, at least for the time being, the threat of an Argentine takeover has been dismissed.
Despite an FIG warning that any Argentine bid for a majority shareholding in FIH would be subject to Falkland Islands law, the Dolphin Fund, owned by the Argentine businessman, Eduardo Elsztain, sought to woo FIH shareholders by emphasising that their intention was wholly commercial, without any desire to disrupt the status quo’. They promised to retain the British management of the FIC and said that they wanted merely to build mutual trust with FIG and the Islands’ population by expanding FIH’s enterprises in the Islands, creating new jobs, attracting new capital and further investment into the Islands’ economy, whilst complying with all relevant legislation and building a longer term relationship with the local community.’
Dolphin, by floating the possibility of a takeover bid of £3.33p per share, were trying to exploit shareholder dissatisfaction with the bid of £3 a share by the Rowland family trust, Staunton Holdings Ltd, based in Guernsey, which the independent members of the FIH Board had recommended. The FIH Board resisted the Argentine intervention as ‘inappropriate and damaging’ but it was a further written warning from FIG that swung the argument. FIG warned that the FIC could lose its specified company status’, which allows it to hold assets in the Falkland Islands, if there was any change in beneficial ownership that FIG deemed as no longer in the general interests of the country’. This led Dolphin, which had been seeking an extension of time to make a bid and reassurances that it would obtain the necessary licences, to make it clear, on 13 April, that it no longer intended to make a formal bid for the FIH Group. Dolphin reserved the right, however, to acquire further shares within the rules laid down by the UK Takeover Panel (it already owns 2.54% of FIH shares).
Dolphin’s withdrawal means that it is precluded from making any further offer for 6 months unless another takeover bid is made.
The Rowland bid of £3 a share was not accepted by shareholders, who successfully encouraged FIH to appoint another independent member of the Board. The FIH Board was seen as too closely tied to the Rowland family, since Edmund Rowland was its Executive Chairman. The Board was otherwise made up of only two people, arguably independent John Foster, the Chief Executive and Jeremy Brade as a non-executive Director (plus the Company Secretary). At the time of the Rowland family offer, the AIM-listed share price was £3.09 per share and its end of year interim results, whilst showing a drop in profits because of the decline in oil exploration activity in the Falklands, nevertheless revealed a record cash balance of £15.1m. The fully audited results for FY 2016-17 will be available in June.
Stop Press: Edmund Rowland sells out
There has since been a further twist in the FIH saga. On 1 May, it was announced that Edmund Rowland had sold his entire stake in FIH to the family trust of the late Jerry Zucker, a US multi-millionaire, who died in 2008. The Jerry Zucker Revocable Trust now owns 28.9% of the FIH shares. Quite how this will alter the structure and future of the FIH Board remains to be seen. It is almost certainly not the end of the story.
Another Argentine Initiative
Just as the Argentine threat to FLH was receding, so another Argentine investment idea was announced, this time by Alberto Albamonte, who holds the Howard Johnson and Days Inn franchise in Argentina. Both chains are part of the Wyndham Hotel and Resorts Group, a global leader, headquartered in the US, owning over 7,220 hotels in 15 different brands in 66 countries world-wideso a major player.
Albamonte hopes, he says, to attract investment partners and obtain permission to build a hotel of 35-40 rooms in Stanley at a projected cost of US$3.5million. He says that this is a resurrection of an idea that he floated in 1999 but which was turned down by the Argentine Government under President Menem.
Albamonte seems to forget that he would have to seek the permission of the Falkland Islands Government, not the Argentine Government, for this but perhaps he has some political motivation for doing so? Leaving aside the Argentine link, would Falkland Islanders really want this form of US investment in their tourist industry? Surely tourists visiting the Falkland Islands want a different experience from one that can be found elsewhere?
