Update: Delta Lloyd Rejects Demand from Top Shareholder to Delay Rights Offer

By Anthony Deutsch and Toby Sterling | March 3, 2016

Delta Lloyd swiftly rejected a demand from top shareholder Highfields Capital to postpone a vote on a 650 million euro ($706 million) rights issue the Dutch insurer says is the only way it can comply with new European capital requirements.

Delta Lloyd stated its position after receiving Highlands’ “notice of objection,” a prelude to a formal court filing in the Netherlands, on Thursday morning. The objection seeks to derail the proposed cash call before it is put to a shareholder vote on March 16.

“Delta Lloyd strongly disagrees with the content, conclusions and demands of Highfields,” Delta Lloyd said in a statement.

“There are no legal grounds for postponing the vote on the rights issue. But, more important, postponing would be detrimental to the interest of Delta Lloyd and its stakeholders, in particular its shareholders.”

U.S. investor Highfields, which is Delta’s largest shareholder with a stake of more than 9 percent, says that Delta Lloyd has other ways to improve its solvency and that shareholders who wish to vote by proxy have not had enough time to consider the matter.

Postponing the vote will let the company take steps that are likely to allow shareholder dilution to be avoided, Highfields said.

Delta Lloyd has argued that it needs the extra capital because its Solvency II ratio of 131 percent at the end of last year was too low.

The rights issue is backed by the largest and most influential proxy advisors used by institutional investors — ISS and Glass Lewis — Delta Lloyd said in a separate statement issued before the pre-litigation notice was sent by Highfields.

“We believe that Highfields’ analysis is ill-founded and their conclusions are inappropriate for a regulated business such as Delta Lloyd,” Chief Executive Hans van der Noordaa said.

Highfields has said that Delta Lloyd’s solvency is already close to its target range of between 140 percent and 180 percent and that it can quickly increase that to between 150 percent and 160 percent without a capital raising.

It has argued that Delta Lloyd’s management has underestimated its ability to generate capital and overestimated tax obligations. ($1 = 0.9205 euros)

(Editing by David Goodman)

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