Two shareholders are trying to put the brakes on a merger between International Seaways and Diamond S Shipping.
one of the complainants has suggested that an agreement with two Evangelos Marinakis-controlled outfits could have kept shareholders from getting the best deal.
The investors in the lawsuits — one filed in the US federal court for the Southern District of New York last Friday and the other in the Eastern District of New York on Monday — argued that shareholders were not given enough information to fully evaluate the $2.2bn deal.
In the Eastern District lawsuit filed by Thomas Beraud, lawyers said regulatory documents detailing the merger did not disclose the terms of an agreement Diamond S signed with Marinakis-backed companies in August 2020.
Attorneys at New York-based Halper Sadeh said the documents fail to disclose terms of a confidentiality and standstill agreement with Capital Ship Management and Capital Maritime & Trading.
The complaint alleged that shareholders did not know if the agreement contained a "don't ask, don't waive" provision that could preclude interested parties from making superior offers for Diamond S.
"Without this information, Diamond S shareholders may have the mistaken belief that potential suitors are or were permitted to submit superior proposals for the company, when in fact they are or were contractually prohibited from doing so," the complaint said.
Diamond S went public in 2019, merging with the tanker fleet of New York-listed Capital Product Partners in a $1.65bn deal that saw the Connecticut-based company agree to keep 25 ships under the management of Capital's private affiliates.
The relationship did not seem to be a happy one, with Marinakis in October 2020 questioning the vision of Diamond S chief executive Craig Stevenson and suggesting the primary goal of management was its own compensation.
As part of the International Seaways merger, Diamond S will pay Marinakis $34m to end the management agreement.
An email seeking comment from Capital Ship Management was not returned.
Both lawsuits name Diamond S and its board of directors as plaintiffs.
In both, Beraud and Southern District plaintiff Stephen Bushansky alleged that the proxy statements filed with the US Securities and Exchange Commission failed to detail various financial metrics and the detail used by third-party valuations financial advisor Moelis & Co.
They also argued that the documents did not disclose the compensation Moelis was paid in previous dealings with major Diamond S shareholders.
The lawsuits say Moelis advised WL Ross & Co — which owns 22% of Diamond S — in a December 2020 transaction. The New York bank was also said to have advised WL Ross parent Invesco.
Bushansky's lawsuit has further alleged that the primary beneficiaries of the merger will be Diamond S insiders.
He alleged that Stevenson would be serving on the enlarged, post-merger International Seaways board and would make $500,000 as an advisor. Stevenson will be joined on the board by current Diamond S board members Alexandra Kate Blankenship and Nadim Qureshi.
Both lawsuits seek to delay the deal until more information is disclosed, or pay-out damages if it is consummated.
International Seaways and Diamond S declined to comment.
