Notes From The Margin

April 7, 2008

Is The Barbados Stock Exchange Becoming Irrelevant? Is it already?

We on the margin were reflecting on the recent conclusion of the Neal & Massey BS&T takeover. Neal & Massey were successful of course in buying the entire company. Some 97% of shareholders willingly took the offer and the remainder were bought out by N&M following the 90% rule. (If you own 90% of a public company you can take possession of the other 10% of shares just by paying for them). So lock stock and barrel, BS&T as an independent entity is history. What was once considered the symbol of white corporate power in Barbados has been sold (but that is another post).

So what happens next? Of course the company will be de-listed from the BSE, it’s now a wholly owned subsidiary so it won’t be traded. As a result the numbers of companies on the exchange take a hit. This will be the latest in a series of reductions in the number of public companies in Barbados. Island Properties Ltd. was taken off the exchange by Colin Brewer & Tony Hoyos, Life of Barbados was taken down by the Mutual (now Sagicor), BWIA was grounded by the Trinidad Government. If we want to think back that far Plantations Ltd. went in a long agonizing slide into oblivion. Now we have BS&T joining the ranks of companies that were once public.

Along with this slow dwindling, there is a scarcity of new companies going on to the exchange. Of course unless you count Sunbeach (we won’t go any further on that one). To make matters worse there’s an overwhelming tendancy for people to buy shares and then hold onto them for long term appreciation. So we have far more buyers than sellers. The mutual funds have added a new dimension but the returns (if you take out the BS&T takeover) have been pretty much moribund.

Merging the regional exchanges will buy time, however the fact of the matter is the investment arena in Barbados is pretty stagnant. If you listen to the rumour mill, the stories floating around about “back room deals” may or may not have substance, but they don’t engender confidence in smaller investors.

The management of the exchange must see the trends, and also must realise that from a long term view, if they do not take action they will be consigned to the same file folder that currently holds BS&T.

Marginal

October 25, 2007

The SC Steps In?

In a move that some would argue is long overdue, the Securities Commission stepped into the BS&T circus yesterday.

 In a statement issued late yesterday, the commission also suggested that BS&T’s 3 000 shareholders “refrain from taking any further action regarding the tendering of their shares to any and all offers until this matter has been fully ventilated and some order is restored to what has become a disorderly transaction”.

In the meantime rumours of lawsuits continue to circulate around Bridgetown.  Some of the questions being asked in particular are “Did the actions of the BS&T board in this matter result in the withdrawal of Ansa McAl’s offer?” and if the answer to that is yes…”Does the board have a legal liability to shareholders who wanted to sell their shares at $10.00?”. We on the margins don’t even pretend to know the answers to either of these questions, but in our humble opinions this whole matter is worthy of intense scrutiny.

There is enough money in question to make a lawsuit worthwhile, however there would appear to be no shortage of people to sue. One thing is for sure, this “disorderly transaction” has rattled the investing public in Barbados far more than any takeover battle before, anything less than complete transparency in this matter will result in lower confidence by investors in the local stock exchange.

The Securities Commission should intervene as the stakes are too high to let this debacle continue unchecked.

Marginal

October 16, 2007

Did Ansa McAl’s Bluff Get Called?

IN the most unexpected outcome of the whole saga both Ansa McAl AND Neal & Massey withdrew their bids for Barbados Shipping & Trading today.

Neal & Massy Chairman, Arthur Loc Jack, was first to break the news of his company’s decision “to tender Neal & Massy’s 28.1 per cent shareholding in BS&T to the ANSA McAL offer and will be recommending that BS&T shareholders who had previously tendered their shares to the Neal & Massy offer, as well as those who had intended to do the same, also accept the McAl offer”.

 

However this was not the case as in very short order Ansa McAl issued a press release withdrawing THEIR offer.

 

“This decision was taken after extensive and in-depth consideration of all the factors, both positive and negative, that have influenced our ability to acquire 50.1 per cent of BS&T shares as well as to execute our stated plans to improve the performance of BS&T in the future,” it said.

“The timing of this decision was also considerate of the many BS&T shareholders who have deposited their shares with ANSA McAL that will now have the opportunity to accept the offer of the competitor, Neal & Massy Holdings Limited (N&M), before the close of their bid on Thursday 18 October, 2007.”

 

Now this would seem to be too much of a coincidence to us on the Margin that they should both choose the same day to withdraw and to offer each other their shares. Neal & Massey’ s Chairman Mr. Lok Jack flew to Barbados to make the announcement, Ansa McAl issued a press release.

 

Looking at what happened our interpretation on this is that both companies came to the conclusion that at $10.00 per share, BS&T was no longer a bargain. Neal and Massey having earlier said that “they would respond” to the Ansa McAl bid, decided to bow out rather than raise their bid of $8.50. Ansa McAl realising that they would be stuck with buying BS&T at $10.00 and having to foot all the costs of restructuring the company, hurriedly withdrew as well, rather than pony up the cash required.

 

This all leads us to believe that much of this whole bid was aimed at making their Trinidadian rival pay handsomely for BS&T and was not supposed to buy the company in the first place. To say that this withdrawal is an embarrassment to them would be an understatement.

 

So this then leaves us several unanswered questions:

 

1. What of the local consortium (or are they about to fade into the woodwork as well)?

 

2. What happens now with the current board of directors of BS&T? We think that their initial actions require some explaining.

 

3. Does BS&T still want to pursue a merger and is it seeking strategic partners? (which is what started this whole mess)

 

One thing we can all be sure of that the BS&T story still is not over, however it would seem that a new chapter is about to begin.

 

Marginal

September 6, 2007

Is The Ansa McAl Takeover Bid Failing?

An interesting bit of news hit the press today, Ansa McAl extended the deadline on their offer for the share by another 15 days to September 21st. We on the margin would speculate that this would mean that the offer has not been taken up by many shareholders and as of the current date, if the offer was to close it would fail as a take over bid. This is not an unreasonable flight of fancy as currently they are being outbid by Neal & Massey’s $8.50 and IPL’s $8.75.

One could speculate further….

Given the environment where it seems that Island Properties Consortium is acting as a spoiler by forcing the price of the shares upwards, and where in the cases of both BNB and Brydens the minority shareholders have done better under new management, it would not be an unreasonable course of action for BS&T shareholders to hold onto their shares to see who wins the bidding war (right now NOT Ansa McAl) or just to hold on to their shares period. (most Bajan shareholders buy and hold shares anyway).

It would be highly ironic if the ultimate expression of shareholder confidence in your management ability would be for them not to sell the shares to you, because they felt you could cause the stock to appreciate after you took over the company.

(We’re sure there’s a chicken and an egg somewhere around here!)

Marginal

August 16, 2007

One Board of Directors Slightly Used – Looking For Work?

Well the BS&T battle rages, and Ansa McAl is responding to the BS&T’s directors statementin the press and Neal and Massey has backraised Ansa McAl and the whole mess is just rolling along.

 It strikes me however that whoever wins this bruising takeover battle. The current board of BS&T is not going to come out of this smelling like a rose. At the very least it suffers from a credibility crisis in saying that Ansa McAl’s offer of $7.00 “does not reflect the intrinsic value of the company” but only very recently recommended that they accept $5.25 in value.

When all the dust settles the investors in Barbados (and elsewhere) are  going to review the conduct of the directors in this matter and how well they discharged their duty of stewardship for the shareholders. They will also look closely at other boards where the same directors hold posts.

There will be a reckoning.

Marginal

July 26, 2007

Banks Holdings Whacks Ansa McAl – Promotes Neal & Massy.

In a stinging rebuke in this mornings papers Banks Holdings CEO vehemently denied that they supported Ansa McAl’s bid to take over Barbados Shipping and Trading. In a full page advertisement in the Daily Nation the CEO called Ansa McAl’s description of the “very enthusiastic” response of BHL management to their bid “highly inaccurate”.

Mr. Cozier goes on to endorse the Neal & Massey deal as better for Banks Holdings than an Ansa McAl takeover.

 “The BS&T Neal and Massy Deale is better for BHL than a takeover of BS&T by Ansa McAl …” – Source: BHL Ad “BHL is NOT on board with Ansa McAL” – Daily Nation 26th July 2007 Pg 15

 

Now here is where we have a problem with this. In making this statement Mr. Cozier in effect endorses one of the three parties in the whole BS&T/Neal & Massy/Ansa McAl/local consortium  mess that this has become. Despite the rest of the text which goes on to effectively say that BHL can do what it needs to with the partners that it has now, Mr. Cozier has in effect taken sides.

It would have been far better to have stayed completely neutral in the whole mess.

Marginal

July 3, 2007

The four ring circus that BS&T has become….

Well, let’s see… we have what was a fairly routine merger (if there is such a thing) that was planned over the last how many ever years. Suddenly we have Ansa McAl coming in with an outright takeover offer, we have Colin Brewer and Tony Hoyos jumping in, we even have Trevor Clarke talking about making an offer.  In the interim we have every blog, call in programe gadfly, and every politician commenting about what the would or wouldn’t do. Interestingly the PM is probably the quietest person on the island in this whole mess. (other than making some very general comments from the Caricom podium)

My thoughts on this…

1. Look for Neal & Massey to launch an outright takeover bid. They already own a large block of shares and would have a relatively easy path to get a controlling interest.

2. Ansa McAl will raise it’s offer. They are big enough that they can afford it, and the asset valuation of BS&T is still far higher than their opening offer.

3. Island Properties remains a dark horse in the race. They are a sentimental favourite, but they need to make an offer for more than just a million shares to make it happen.  If the rumour mill is to be believed, they have a sponsor (a bajan one) behind them. Guys, those of us on the Margin wish you good luck and hope you pull it off. (if for no other reason that it would be fun to watch you run BS&T aggressively)

4. Trevor Clarke…… hmmn maybe I’ll come back to this one.

5. I realise that the silly season is lurking out there but the opposition’s position on this is laughable. How would they undo the deal? If a shareholder wants to sell his or her shares how does government get into it? And what signal does that send on foreign investment? There are some very bright people in the DLP, this demagoguery is unworthy of them.

One thing is for sure, this is far from over, and will be the source of much conversation on the cocktail circuit over the coming weeks.  I’m sure it will provide fertile ground for the bloggers as well.

As most of us have no shares, we’ll just look on from the margins.

Marginal

July 1, 2007

Clanger Alert!!!!!

Filed under: Barbados,BS&T,Capitalism,Globalisation,mergers,Neal & Massey — notesfromthemargin @ 1:33 am

Tonight on CBC  TV we had a financial expert talking about the impact of the proposed BS&T Neal & Massey merger.

 “Investment analyst Jepter Ince believes the future of the Pine Hill Dairy will come under severe scrutiny if Barbados Shipping and Trading merges with Neal and Massy Holdings Ltd.
He made the comments on a pre-recording on this week’s current affairs programme, ‘The People’s Business”, which examines the recent mergers in the region.

 “We must remember that BS&T now has 20 companies bringing to this merger across two distribution channels, retail and financial. Decisions are going to be made whether or not it is financially feasible to bring milk from Trinidad and close Pine Hill. Is it going to be financially feasible to dispose of the assets within Banks Breweries or would it make sense to shut our production plant down, expand Pine Hill or turn to powdered milk”

Of course Mr. Ince neglects on minor fact. BS&T is NOT the majority shareholder in Banks Holdings! It’s an associated company (much like Almond Beach Hotels).  So BS&T/Neal & Massey would not be able to just say to close down PHD, which is majority owned by Banks Holdings, of which BS&T only owns 29%.

For that matter they wouldn’t be able to “dispose of the assets of  Banks Holdings” either!

You would think that a financial advisor would check his facts before going on National TV to alarm people.

Marginal

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