Sep 2011 Financial News

Lascelles plays hardball

Sep 14, 2011

Local conglomerate Lascelles deMercado and Company (LdM) set another hurdle for its "hostile takeover" bidders Black Sand Acquisition on Tuesday, requiring them to resubmit their proposal in accordance with regulatory guidelines.

Black Sand responded by releasing a Modification to its Original Takeover Bid Circular late yesterday. It clarified that the 74.26 million Carreras shares held by Lascelles were not put up for sale as claimed, while extending the US$3.86 per share offer deadline initially by a month from September 19 to October 18.

"LdM is not obligated to issue a Directors' Circular until Black Sand issues a compliant circular," said LdM directors.

LdM asserted that both the Financial Services Commission (FSC) and the Jamaica Stock Exchange (JSE) "agreed" that Black Sand's circular did not comply with JSE rules or the Securities Act and Regulations.

It, however, did not disclose the apparent deficiencies, and attempts to contact key persons within Lascelles and the JSE proved futile up to press time. LdM says it expects Black Sand to issue a supplement to the original circular in short order and will respond appropriately.

Black Sand immediately responded with Supplement No 1 to the offer filed with the JSE which: corrected the Carreras error; provided additional details on Black Sand, including date of incorporation of July 15, 2011 and a declaration that it has no prior trading history or financial statements; and offered to conduct due diligence on Lascelles and its subsidiaries on behalf of LdM shareholders.

Last month, LdM stated that Black Sand's original proposal was undervalued, lacked evidence of the capital and could strip the group of its profitable Appleton rum brand. Consequently, it advised shareholders to hold on to shares until further notice.

Black Sand, a group of investors led by former Lascelles managing director William McConnell, has bid for no less than 90 per cent of Lascelles' ordinary shares and 100 per cent of the two preference stocks. Direct subsidiaries of Lascelles are: Wray & Nephew group, Globe Limited, Globe Holdings Limited, Lascelles Merchandise Limited, Ajas Limited, John Crook Limited, Transportation Agencies Limited, and Turks Island Importers Limited.

"We want to assure the market that the board will meet the requirement at the appropriate time. We have prepared the groundwork and obtained all relevant valuations to issue a Directors' Circular if and when required," said Lascelles directors on Tuesday.

"That circular will also explain our trading strategy for the company's future, focused on growing value for all our shareholders. We remain focused on productivity and growth and are conducting business as usual in our operating companies."

Black Sand initially produced its takeover bid for Carreras on August 4.

Outlining the rationale for the takeover, principal broker Pan Caribbean said Lascelles is controlled by CL Spirits Limited, a subsidiary of the CL Financial group, a financially distressed conglomerate currently under management of the Trinidad and Tobago government and its central bank.

Hostile takeover

On July 24, it said, CL Spirits defaulted on US$342 million of notes issued in Trinidad and Tobago and Jamaica, and secured by a pledge of CL's shares in Lascelles deMercado. Black Sand is offering US$3.86 for each of the ordinary share valued between US$334 million to US$371 million.

"This is the first attempt at a hostile takeover in Jamaica, so our local lawyers, Livingston, Alexander & Levy, and our legal consultants in London, Jones Day, who have extensive experience in this area, are advising the board," said directors of LdM Tuesday.

However, there was precedent in the early 2000s when GraceKennedy relinquished majority control of Kingston Wharves. The port company's largest shareholders now include National Commercial Bank and two port-related entities operations.

Lascelles made J$536.7 million profit for its June quarter 2011, or 47 per cent more than the same quarter a year earlier. The conglomerate made 56 per cent of its profit from its liquors, rums, wines and sugar division, followed by its investments division, general insurance division, general merchandise division and transportation services division.

Hold shares

The Lascelles board, which is chaired by Trinidadian Gerald Yetming, stressed that shareholders should hold their shares as the Black Sand offer was undervalued.

"We asked the JSE previously to issue a statement on the status of the offer so that our shareholders and the public did not form the view that LdM is tardy in its obligations. The JSE said it saw no need for this. We had suggested the same thing to the Financial Services Commission, since we believe it is the duty of the FSC to update the public about their interventions in the offer and to impose a time frame for compliance," said the LdM statement.

"The board remains confident these two bodies will meet their institutional mandates. Jamaica's financial regulatory system is an effective watchdog for all shareholders and the public. LdM is a robust company with successful operating companies and brands which compete on a global basis. The board has an ambitious mission, and through leadership and experience will protect and grow the value of this great company," it concluded.


Source:
Steven Jackson, Business Reporter
steven.jackson@gleanerjm.com
Jamaica Gleaner
Wednesday September 14, 2011

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