Preferred Shareholder Files Lawsuit Against Navios Maritime Holdings To Stop Tender Offer: An Update

by: Norman Roberts

Summary

I usually wait at least three months to update one of my company reviews, but concerning Navios Maritime Holdings a timely update is warranted.

It appears that NM's Offer of Exchange was soundly rejected by a majority of its preferred shareholders.

Undeterred, Navios has sweetened its offer, which still is bitter to the taste of this investor.

Much more sugar is required to sweeten this sour deal, at least as best as I can tell from the preponderance of my follower's responses.

On September 21, I first learned about the Offer to Exchange that Navios Maritime Holdings (NYSE:NM) had presented to its preferred shareholders. I quickly realized that this travesty of an offer was little more than a thinly veiled extortion attempt designed to scare and intimidate us into accepting mere pennies on the dollar by threatening us with the loss of all key rights we held as preferred shareholders if we refuse to tender our shares.

Worse yet, the offer was worded in such a way that the majority of my followers, including me, had difficulty figuring out exactly what potential outcomes we faced based on who else might tender and how many shares were tendered. The part that really enraged me and induced me to act was the way the offer was carefully worded, as if the company was in no way recommending or advising how we should decide. The following paragraph was liberally sprinkled throughout the offer:

You must make your own decision whether to tender Series G ADSs or Series H ADSs in the Exchange Offer and, if so, how many of such Series G ADSs or Series H ADSs to tender and the form of consideration to be paid therefor. Neither we, our Board of Directors, the Information Agent, the Exchange Agent, the Depositary, nor any affiliate of any of the foregoing or any other person is making any recommendation as to whether or not you should tender your Series G ADSs and Series H ADSs in the Exchange Offer. We have not authorized any person to make such a recommendation. You are urged to discuss your decision with your own tax advisor, financial advisor and/or broker.

The following day I submitted a Seeking Alpha article, as the opening salvo in my battle to prevent Navios from succeeding in attaining the necessary 2/3rd of the preferred shares of each series to accept the low-priced tender offer, thereby forcing the remaining preferred shareholders to hold what would become virtually worthless shares. Within a very short time, many of my followers and others joined my battle against Navios. Of late, several have reported that they have been bombarded with requests to accept the offer.

Because I fear Navios will persist in its efforts to rid itself of the preferred shareholders, the accumulating missed dividend payments (soon to be three), and the restrictions and penalties it will be forced to bear, I have retained counsel to aid me in this fight and have filed a lawsuit in the United States District Court for the Southern District of New York on behalf of all preferred stockholders.

The best way to stop Navios from taking advantage of its preferred stockholders is for us to refuse to tender our shares into the offer. However, to the extent that Navios succeeds in striping us of our valuable preferred shares and our rights through its coercive offer, I am taking decisive action to hold the Company and its directors personally liable to us for the harm they have caused, including seeking to restore our rights and an award of significant monetary damages.

Now for the update:

Early this morning, Navios reported the results of the Offer To Exchange, which failed miserably. According to Kamikazi, a respected member of my No Tender coalition:

If my math is correct, as of last night only 34.5% of H and 18.5% of G shares were tendered. I have no doubt that the management will have to sweeten the offer much more than the most recent one. They are way, way short of the target, especially, in Gs.

Consequently, according to Kami's suspect math, lets' see how many shares of each series were actually tendered. There are currently 2,000,000 shares of the G outstanding and 4,800,000 of the H.

Therefore for the G Series:

  • 2,000,000 x .185 = 370,000 shares were tendered.
  • 2,000,000 x .6667 = 1,333,340 were needed
  • 1,333,340 - 370,000 = 963,340 G Shares short of Success.

Now for the H Series:

  • 4,800,000 x .345 = 1,656,000 shares tendered
  • 4,800,000 x .6667 = 3,200,160 needed
  • 3,200,160 - 1,656,000 = 1,544,160 short

The result was that Navios sweetened its offer, but as far as this preferred shareholder is concerned nowhere near enough to gain mine and a majority of my followers acceptance. Not only is the offer too low dollar-wise, at best it's also an offer of less than 0.50 on the $1 in the event prorated prices kick in. However, there is one thing we can be certain of, we will receive no more that 0.50 on the $1, because who in their right mind would want to receive common shares in lieu of cash.

So where are we now:

The Offer has been extended to 10/31/16 with the G Series going for $7,18 G and the H for $7.06; or at 1/2 of those figures. Because we are in polite company I won't tell the NM board where I feel they should stick their offer.

Disclosure: I am/we are long NM-G, NM-H.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.