Jun 2015 Financial News

H&L shareholders to receive purchase offer if GK sale successful

Jun 10, 2015

THE sale could eventually pave the way for a delisting, but it would require the more than 1,370 shareholders to sell out. The unnamed purchaser will offer to buy all the shares at the same price it plans to buy GK's stake.

"Following that, having acquired 58 per cent of the company, the purchaser would be obliged to make a bid for all the other shareholders to buy their shares at the same price at which they purchased GK shares," attorney Trevor Patterson, representing GK on this matter, explained to shareholders at the H&L annual general meeting on Monday held at its Spanish Town Road head office.

GK entered into a conditional agreement for the sale of its shareholding in H&L, inclusive of the Rapid True Value and Agro Grace businesses in April this year. Details of the agreement, such as the parties involved and the agreed price, remain undisclosed.

Patterson added that the process to sell shares would be regulated by the Jamaica Stock Exchange (JSE,) on which the H&L stock trades.

"It may or may not succeed in buying more shares. But that is something they would have to do," he said of the purchaser.

A listed company requires at least 20 per cent of the stock in the hands of at least 100 shareholders, otherwise it may be fined, suspended or delisted, according to the JSE rule book amendment.

As of January, there were 1,373 shareholders holding 80.8 million ordinary H&L stock units. Grace holds 47 million shares or 58 per cent, followed by real estate conglomerate Pan Jamaica Investment Trust at 16.8 million shares or 21 per cent. Mayberry Investments company accounts total some 4.3 million or 5.3 per cent. That puts a total of 84.3 per cent in the hands of the three largest shareholders. Other institutional investors hold smaller shareholdings, with the remainder held by individual shareholders.

"Assuming it is completed, what would happen is that the purchaser would seek to add their own directors to the board. So the GK directors would resign and the purchaser would nominate their own directors," stated Patterson on the purchase of GK's block.

Patterson added that basically H&L will continue in the normal way except that one shareholder would have exited the company and another shareholder would have taken their place.

H&L chairman Erwin Burton expressed confidence in the future of the chain without its largest shareholder. GK wants to get rid of its shares in the company in order to focus on core business.

"They have indicated that H&L is not a part of their core business and that they will concentrate on food and financial services. But we have a tremendous faith and confidence in the future viability of H&L," stated Burton in response to a query from outspoken shareholder Orette Staple at the annual general meeting.

H&L made $34-million profit for its latest quarter or 14 per cent lower year on year. Over the years, H&L suffered from a flat construction sector. There are currently 10 Rapid True Value outlets across Jamaica, along with some six Agro Grace Retail Centres.

On Monday GK group chief executive Don Wehby described the decision to sell its H&L stake as tough.

"I must say to the shareholders of H&L that it was not an easy decision. It was debated very heavily at the executive level at GK, the board of GK....and it was fully endorsed by the shareholders at the GK annual general meeting. We believe it's in the best interest of GK going forward that we concentrate on the food business locally and internationally and the financial services in the region," Wehby said at the H&L annual general meeting.

If successful, GK will reallocate capital to earn higher returns for investors. This would include increasing its manufacturing capacity and also seeking opportunities to acquire food businesses in Jamaica.

The GK Group made $702-million net profit or about one-quarter less than a year earlier due to financing its US operations and the impact of an asset tax. GK Group equity stands at $36.4 billion.

Source:
BY STEVEN JACKSON
jacksons2jamaicaobserver.com
Business reporter
Jamaica Observer
Wednesday June 10, 2015    

http://www.jamaicaobserver.com/business/H-amp-L-shareholders-to-receive-purchase-offer-if-GK-sale-successful--p---_19110441