A minority shareholder's opinion Dear Chris,
Thank you for sending us your press release and being there for us all.
I understand your viewpoint. I wholly agree that the offer (cash or exchange) is inadequate.
It is unfortunate that some of the funds who were part of your minority coalition made the case that the exchange ratio of 3.5:1 would be fair. I believe they were caught into this logic and not to lose face, had to say yes to the offer even though Nord did a dismal job at raising awareness of 'its' assets, which included 72% or HRG. They were caught because Mordashov still wants to maintain total control of Nord (by not having a high enough float) and because Nord's share price is dismally low (a result of not enough demand due to insufficient float, bad deals, shaddy disclosure, unsound situations in some of their other assets). They should've done a better job of promoting the hell out of HRG and its growth profile, including Bissa, Prognoz and all the other potentials they have. They should have made their dealings transparent with regards to all assets and instituted a dividend. Even though they are doing an ok job of running the company, they are still trying to steal the company away based on many metrics. Why should we agree or even contemplate that? I really wish it were otherwise since there are so many good deals right now in the market.
However, we are still 'stuck' in their paradigm of lies, deceit and bad reputation. They may be trying to change that, but their actions and this offer still does not support this change. They are far from having earned our trust and respect. I would be naîve to believe that suddenly, they would turn around and become good stewards of my investment were I to become a Nord shareholder. We should not 'hope'
for this change, but be reassured from the top down and be wholeheartedly convinced! Otherwise why contemplate such an avenue? If there was respect, they would have already commited to get a TSX listing for Nord's shares to make it easier for the retail to transact here in Canada. We should not have to plead!
You clearly state that the offer is insufficient but that ultimately, you are ready to ride it under Nord because you believe that:
1) Nord does not have enough cash to make a proper offer
2) if Nord is successful in acquiring HRG, Nord will succeed at getting their price up double to triple over the next 12- 18 months
3) You see little risk that Mordashov will try and take Nord private again after all the effort he has made to get it public.
I reject 1), that is not our fault, but has been a design flaw of Mordashov's making.
What makes you think they will be able to achieve 2)? What is stopping them from achieving this now?? They should work on that prior to making us an offer. Or make a proper offer in spite of that. It would be our dividend for holding HRG for this unsatisfying end.
Regarding 3), there was talk of selling to the Chinese a few months ago. At 25% float, Mordashov will still be able to do what he wants. I personnaly do not want to be a vassal to a dictator who does backroom deals and disrespects minority shareholders.
I say let Mordashov or one of his 'friends' make a proper offer if Nord/he does not have the funds, I do not care to strenghten his ugly duckling at my own expense. Then let him do a 'sweet' deal with his 'friends' later once we are gone.
You brought out the fact that a trial lawyer believed that there was ground for a minority shareholder oppression suit. Instituting this to stop him from milking HRG should allow for a much better bargaining position, since he will have to dish out his own cash to support his ugly ducking instead of borrowing it from our pockets, without our consent.
Let him bite the bullet and fall on his sword. In all cases, he will still win out since he acquired all his shares at substantially manipulated discounted values over the years. Once HRG is his golden cow, he can then milk it to his leasure. To get hold of it, he must pay actual value. It seems clear that otherwise, it could lead to mutual destruction. Only he has the key to change the course of events. This is Karma. We should not throw in the towel.
The only good thing to come out of this is that it has put a floor underneath our share price, whatever happens, since as usual, there are so many potentials for delays.
Best of luck to us all. Better yet, let's take an active hand in making our luck.
SB