BCL shareholders vote in favour of delisting from BSX
By Jonathan Kent Business Editor
Shareholders of freight shipping company Bermuda Container Line Ltd. have voted in favour of the company delisting from the Bermuda Stock Exchange.
A special general shareholders' meeting last Thursday produced "overwhelming" support in favour of the move, the company said in a brief statement released last Friday.
Company president Geoffrey Frith said BCL's board of directors had recommended the delisting to shareholders, principally because of the expense of complying with new international accounting standards due to be introduced for public companies.
The BCL statement read: "The requisite 90-day notice of delisting has been sent to the Exchange and it is expected that the last day of listing for Bermuda Container Line Ltd. will be Friday, February 26, 2010."
The announcement comes in the wake of Kentucky Fried Chicken (Bermuda) Ltd.'s reiteration last week of its intention to delist from the BSX.
In his latest report to shareholders, KFC Bermuda chairman Donald Lines said the board believed delisting was in shareholders' best interests "in order to eliminate unnecessary administrative costs which result from a stock exchange listing of a thinly-traded stock".
International Financial Reporting Standards (IFRS) will be introduced for public companies for fiscal years starting on or after January 1, 2011.
"Those accounting standards, while very relevant for large multi-national companies, are very onerous for small and simple companies like BCL," Mr. Frith told The Royal Gazette.
IFRS would not provide BCL shareholders with any more relevant information than the currently adopted Canadian Generally Accepted Accounting Principles (GAAP), Mr. Frith suggested, and, in his opinion, would make financial statements "more confusing".
"Judging by the best information that's available on the experience of companies in Europe, it's cost them one to two percent of their revenues for the initial changeover," Mr. Frith said.
"In BCL's case that's more than $50,000. And there would be more ongoing costs as well, because there is more disclosure and more work required."
BCL operates the weekly ocean freight service from New Jersey on the MV Oleander and, through its associated company Somers Isles Shipping Ltd., the thrice monthly service from Florida on the MV Somers Isles.
The company has been impacted by a decline in imports to the Island during the global economic downturn and earnings from its core shipping operations were down 15.5 percent in the first half of this year, compared to the same period in 2008.
Mr. Frith said BCL's directors had another concern about being listed on the BSX share price volatility.
"Unfortunately most public companies are very thinly traded and the prices can go all over the place," Mr. Frith said. "For example, we've had two trades in the last month one at $12 and, a week later, another trade at $9.55 per share.
"Nothing changed during that week, but there was a huge vari "Nothing changed during that week, but there was a huge variation in the share price of the company."
That trade had reduced the company's market capitalisation by about $6 million, he said.
Yesterday, BCL regained that lost ground, rising $2.45, or 25.6 percent, on the trading of 5,000 shares, leaving the company valued by the market at $36 million.
The delisting means that shareholders will no longer be able to sell their shares via the public exchange. Mr. Frith said the company had plans to enable its substantial number of small shareholders to be able to liquidate shares easily in the future, if necessary.
He said BCL was working with legal advisers to ensure the company could buy back its own shares from small investors those holding 1,000 shares or fewer who needed to liquidate them.
This could work by allowing the shareholders to sell their shares to BCL at the last recognised book value, Mr. Frith said, and would be a scheme that could be operational for the "foreseeable future".
He stressed that BCL was not encouraging small shareholders to sell up, but providing them with an assurance that they could sell their shares if they needed to.
BSX chief executive officer Greg Wojciechowski said it was always disappointing when an issuer decided to delist, as it was one fewer security available for purchase by local retail investors.
Delisting from the BSX would mean the loss of investor protections that come with a public listing, he said, and he was concerned that shareholders should maintain rights to transact their shares.
In any case where a company was considering delisting, it was important that shareholders obtained full information about the reasons for the corporate decision and the consequences for themselves, Mr. Wojciechowski said.
On the accounting change, he said IFRS was being introduced with the aim of increasing transparency and uniformity.
"It's ironic that an unintended consequence of this is that companies may seek to withdraw from public listing and therefore diminish investor protection," Mr. Wojciechowski said.
He pointed to Butterfield Bank's successful sale of $200 million of Government-guaranteed preference shares in June as an example of how BSX-listed companies could raise capital through the local market.
"Butterfield's placement shows there is investor appetite in Bermuda," Mr. Wojciechowski said. "If companies do need capital, they can float more stock and investors will respond."
He added that a public listing gave companies many advantages, such as increasing their options for financing and an enhanced corporate image and reputation. Investors also benefited, through access to a regulated market offering transparent share dealing through licensed brokers, as well as through access to timely corporate information.
"Should Bermuda Container Line need to re-enter the domestic capital market in the future, and it meets the listing requirements, then it will be able to relist," Mr. Wojciechowski said.
