Argentine Takeover Threat against FIH Group plc

Summary 

One of Argentina’s wealthiest businessmen, Eduardo Elsztain, has indicated an interest in making a takeover bid for FIH Group plc, which retains significant interests in the Falkland Islands through the Falkland Islands Company (FIC). So far, FIH Group shareholders are reported to have vigorously resisted the suggestion and the Falkland Islands Government (FIG) has stated that any proposed change of ownership affecting assets held in the Falkland Islands would be scrutinised for compliance with Falkland Islands law. It is unlikely that any such bid would be allowed to succeed. The fact that it has even been raised suggests that it is more to do with aggressive Argentine posturing than serious business intent. 


In February, the Chief Executive of FIH Group plc wrote to FIH shareholders recommending the takeover bid of £37.3 million from Staunton Holdings, a Guernsey-based shell company, owned by the Rowland family trust which is the largest stakeholder in FIH Group (owning about 26% of their shares). Edmund Rowland is the Executive Chairman of FIH Group (and the son of David Rowland, a major Conservative Party donor). This raised some concerns amongst smaller shareholders that the offer of £3 a share was below the net asset value (NAV) of the company. 

In mid-March, the FIH Board made it public that the Dolphin Fund Ltd, registered in Uruguay, had written to them "to request information to enable it to evaluate making a cash offer, at a significant premium to the current offer by Staunton Holdings Ltd of 300 pence [per share]… of the share capital of FIH.” It indicated that Dolphin already held 2.54% of FIH’s voting rights and would not accept Staunton’s offer. Dolphin urged FIH shareholders not to take any action with regard to Staunton’s offer until further notice. 

It quickly became known that the Dolphin Fund was owned by Eduardo Elsztain, Argentina’s largest property developer with major investments in Argentina’s agribusiness and in the mortgage market, jointly owning the Banco Hipotecario with the Government of Argentina. This then raised the possibility that, if a successful bid was made, Argentina would take over FIH’s significant business interests in the Falkland Islands ‘by the back door’. 

The FIH Board let it be known that the potential counter-bid would be vigorously resisted by the majority shareholders in the company – and the FIG issued a statement on 17 March stating that, whilst this was a matter for FIH shareholders to decide, FIG would closely monitor the status of the Dolphin Fund’s potential bid and that any proposed change of ownership would be "scrutinised for compliance with Falkland Islands law.” 

FIH owns significant interests in the Falkland Islands through the Falkland Island Company (FIC) in various areas, including: 

* retail services, including the West Store and the Capstan Gift Shop; 

* property ownership of over 400 acres of land in Stanley and its environs, with over 40 residential properties to let; 

* motor sales and rental, acting as agents for Landrover in the Islands and as authorised dealer for JCB; 

* agency services for squid fishing vessels, cruise ships and other businesses, for local tourism through Penguin Travel, for insurance broking (sole agents for Caribbean Alliance Insurance Company); and 

* shipping services through Falkland Islands Shipping which organises civilian freight services to and from the Islands. 

FIH also owns, since 2004, the Portsmouth Harbour Ferry Company which runs the Gosport ferry, and, since 2008, MOMART, a leading UK company handling the storage, handling and transport of fine art and antiquities. FIH is a listed company on AIM (Alternative Investment Market). 

Brief History (from FIH Group website) 

* 1851-2: the Falkland Islands Company (FIC) was incorporated in 1851 and received its Royal Charter in 1852. Its purpose was to engage in agriculture and general trading activities the Falkland Islands and to establish a shipping link with the UK. 

* 1913: a shipping service was established to and from Montevideo, Uruguay. 

* 1945: FIC’s landholdings in FI totalled 1.2 million acres with some 300,000 sheep. 

* 1962: FIC shares listed on the London Stock Exchange. 

* 1972: FIC acquired by the Coalite Group plc. 

* 1986: Coalite acquired by Anglo-United. 

* 1991: FIC agricultural landholdings sold to FIG following the Shackleton Report. 

* 1997: Anglo-United distributes shares in Falkland Islands Holdings (FIH) to shareholders to raise capital. 

* 1998: FIH listed on the London Stock Exchange. 

* 2003: FIH share listing moved to AIM. 

* 2004: Falklands Oil and Gas Ltd (FOGL) set up and granted oil exploration licences to the south and east of the Islands. 

* 2004: FIH acquires Portsmouth Harbour Ferry Company in the UK. 

* 2008: FOGL farm-in deal with BHP Billiton to fund oil drilling plans. 

* 2008: FIH acquires MOMART. 

* 2015: FIH divests itself of all shares in FOGL. 

* 2016: FIH changes name to FIH Group plc but FIC remains a core part of the Group.