Hurricane Melissa has delayed the court hearing into Hansa (HANA) shareholder Arnhold’s objections to the fund’s merger with Ocean Wilsons.

In a statement to the stock exchange, the £104m global investment fund said ‘adverse weather conditions resulting from the proximity of Hurricane Melissa to Bermuda’ had delayed its court hearing after the category five hurricane, with winds of up to 185mph, wreaked havoc across the Caribbean.

The hearing was put in place after US value investor Arnhold, which is a shareholder in Ocean Wilsons, objected to Hansa’s offer to takeover its largest holding, which makes up 23% of the fund and has been a holding for more than 66 years.

Arnhold criticised the deal as ‘deeply flawed and unfair’ as well as ‘destructive’ for Ocean Wilsons shareholders, who are being offered new Hansa share units. These comprise of one Hansa voting ordinary share and two Hansa non-voting A shares.

However, Arnhold calculated the deal is at a 40% discount to Ocean Wilsons’ value and leaves shareholders with ‘illiquid’ stock.

Chair of Hansa Jonathan Davie confirmed in its half-year results that while the merger was approved in September, the objections meant the court approval of the merger had been delayed to give Arnhold time to object.

‘The board continues to work towards the timely completion of the combination,’ said Davie.

‘While the scheme is not able to progress until it is sanctioned by the court, both companies intend to proceed as quickly as practicable once this hurdle is cleared.’

In half-year results to the end of September, Hansa reported a net asset value (NAV) increase of 5.7%, falling far short of the 15.1% increase in the MSCI All Country World index.

The biggest detractor to performance was Ocean Wilsons, which enjoyed a share price rally following the sale of Brazilian port operator Wilson Sons but have fallen sharply since the merger with Hansa was announced – falling 11.5% over six months.

Letchfield said Ocean Wilsons and Hansa have many ‘shared characteristics’ but the main difference is the former’s ‘mature private equity portfolio’, which it moved towards in a strategy shift in 2014.

The merger would give Hansa shareholders ‘instant direct exposure to a mature private equity programme consisting of top tier, hard to access managers,’ he said, adding that commitments made since 2014 have been to a ‘smaller group of core buyout managers in developed markets, particularly the US’.

The managers include TA Associates, KKR, Silver Lake, PAI Partners, and Apollo, as well as more niche managers such as healthcare specialist OrbiMed and Financials specialist Reverence Capital.

‘We continue to believe that the Ocean Wilsons portfolio strongly complements the company’s own investments, with the private equity investments since 2014 creating a significant point of difference,’ said Letchfield.

Hansa’s global equity portfolio rose 18.1% over the six months period, with just two detractors in funds managed by Arch and Orion.

The strategy of Hansa is to ‘avoid permanent capital impairment’, meaning losses are limited when markets fall but when they rise, the upside can also be limited.

‘This stance can draw criticism in buoyant markets such as these for not taking enough risk,’ said Letchfield.

‘We are very comfortable with that. We would rather be consistently right on the downside than occasionally spectacular on the upside.’

To evidence the approach, he said six holdings have more than doubled and four have more than tripled over the past five years.

The latest addition ‘fits in very well with this philosophy’, with International Petroleum Corporation becoming the newest holding.

Letchfield said it is a ‘contrarian investment within a neglected energy sector’, trading at less than half its stated NAV.

‘IPCO combines long-life, low-decline production assets with visible free-cash-flow growth from its fully funded oil-sands project in Canada,’ he said.

‘The company is part of the Lundin Group, whose family ownership at 38% ensures a disciplined, shareholder-aligned culture.’