International Seaways finds itself in an unaccustomed place, with a sharp fall in the rankings of Webber Research & Advisory’s ESG Scorecard.
The New York-listed tanker owner dropped from third in last year’s Webber scorecard on environmental, social and governance issues to 10th in the table released on Thursday, one of the biggest falls among the 52 companies.
The culprit was a decision by Seaways’ board to introduce a “poison pill” into its bylaws on 9 May to ward off a further accumulation of shares by private companies controlled by John Fredriksen, the Norwegian shipping magnate.
Webber explains drop
Such tactics, formally known as shareholder rights agreements, are often seen as contrary to shareholder value, and in this case were sharply criticised by Fredriksen representatives.
“INSW recently adopted a poison pill to stave off John Fredriksen’s Seatankers Group from acquiring additional shares in the company,” Webber wrote, using the Seaways ticker symbol on the New York Stock Exchange.
“And while they included additional carbon data, INSW still fell 7 spots to 10th."
Webber Research founder Michael Webber told TradeWinds that poison pills seek to prevent a hostile acquirer, “perceived or otherwise”, from exceeding a shareholding threshold by offering its other holders discounted shares.
“Basically it’s a dilution dead man switch,” he said.
“In one sense, it can give the incumbent management team leverage in terms of securing the better value, but it can also create a moat around the target’s status quo and obstruct shareholder value creation.
“Our model doesn’t consider the intent — it evaluates the race car, not the driver.”
TradeWinds has approached Seaways management for comment.
TradeWinds reported on 28 April that Fredriksen had acquired a 16% stake in the diversified New York tanker owner. This was quickly edged up to 16.6%.
Seaways dropped the pill a few days later, in effect promising Fredriksen heavy dilution if he were to take his stake higher than 17.5%.
Fredriksen representatives lashed out in an open letter to the Seaways board, saying they were “extremely disappointed” in the tactic.
“This poison pill will hinder communication with shareholders regarding strategic decisions and will not allow shareholders to realize the full value of their investments,” the letter stated.
Seaways responded with a defence of management’s performance and the pill defence.
“It is particularly appropriate where, as here, affiliates of one of the company’s competitors have quickly and secretly amassed a significant stake in the company,” Seaways retorted.