The British financial media is reporting the existence of a letter sent by the government of the Falkland Islands to Falkland Islands Holdings group, which is in the midst of a controversial takeover bid dispute with an Argentine fund. Last month the Dolphin fund controlled by the Buenos Aires property developer Eduardo Elsztain said it was considering a bid for FIC’s Aim-listed parent FIH Group.
In the letter made public and dated 5 April, the government of the Falklands points out to the FIH Group that under its current arrangement with Falkland Islands authorities, FIC does not require a licence to own land and operate.
However if there is a change of control the exemption could be removed if it “was considered to no longer be in the general interests of the country”, the government cautioned. FIH would “then require a licence from the government to obtain any qualifying interest in land”.
This is considered vital by the Islands government given the ongoing Argentine claim of Falklands sovereignty, and the fact that FIH Group assets include the 165-year-old Falkland Islands Company (FIC) which owns swathes of land, runs essential supply routes and shops, and plays a crucial role in the fishing and oil industries.
According to the reports, John Foster, a director of FIH, received a letter dated 5 April 2017 from the Chief Executive of the Falkland Islands Government providing clarification on the status of The Falkland Islands Company in the context of any change in the beneficial ownership of FIC.
The Falkland Islands Government has been informed that you have received a proposal which may result in the transfer of the beneficial interest in your company.
Your company is a 'specified company’ for the purposes of the Land (Non-Residents) Ordinance 1999 Section 3. Upon any change of beneficial ownership, it is necessary for the Government of the Falkland Islands to consider whether the company should remain a 'specified company’, which permits it to acquire land in the Falkland Islands without obtaining a license.
If Falkland Islands Company’s current 'specified company’ status was considered to no longer be in the general interests of the country, you may lose this status, and would then require a license from the government to obtain any qualifying interest in land.
In the event there is a change in beneficial ownership, I request that you inform me as soon as reasonably practicable, to ensure that the Government can review the company’s on-going status without delay.”
The clarification in the letter is not new since on 17 March the FIG in a release dated March 17 stated that any proposal change of ownership affecting assets held in the Islands will be scrutinized for compliance with Falklands law.
“The Government of the Falkland Islands has noted with interest, Dolphin Fund’s communication with FIH shareholders on March 14” said the FIG release.
Nevertheless, “while this is a matter for the shareholders to decide, the Government continues to closely monitor the status of Dolphin Fund’s potential bid”, since any proposed change of ownership affecting assets in the Islands, “will be scrutinized for compliance with Falkland Islands Law”.
At the time Dolphin said it had written to the Board of FIH Group plc asking for information to enable it to evaluate making a cash offer for FIH, at what Dolphin said would be a significant premium to the current offer of £3 per share made by Staunton Holdings Limited. Dolphin said it wishes to enter into a constructive dialogue with FIH and its major shareholder with a view to making a recommended offer in due course.
The original bidder for FIH, Staunton Holdings Limited, is a company linked to the Rowland Family, of which FIH Chairman Edmund Rowland is a member. He is the son of Tory controversial donor David Rowland. Another company linked to the Rowland Family already owned 22.65% of FIH and Staunton owns another 2.34%. Dolphin currently owns 2.54%.