Aug 2011 Financial News

Lascelles boss scoffs at delayed Black Sand bid, strategic review underway

Aug 05, 2011

Lascelles DeMercado and Company says it has no suitor other than the Black Sand Acquisition Inc, but even that takeover process has been scoffed at by the new leader of the spirits conglomerate who says the proposal is yet to be presented for scrutiny.

Black Sand, a newly formed group of investors with William 'Billy' McConnell at the centre, has announced a hostile US$3.86 (J$332) per share bid for Lascelles, but is a week late making the formal offer pending final sign off by regulators on changes to the terms.

Well-placed sources say a key regulator had asked for additional explanatory notes and that there will be no material change to the offer that would likely be out today.

"Technically, there are no offers on the table," Lascelles group managing director Fraser Thornton said Wednesday in derision of Black Sand's failure to meet its own timetable.

Thornton, who succeeded McConnell as head of the conglomerate on July 1, said Lascelles and its shareholders learned of the offer the same way the media did - via a press release last Thursday, July 28. The takeover bid circular should have been filed the next day.

"We were surprised to learn the offer document has not gone to the stock exchange. We find it surprising that a press release discloses plans for an offer, only to find out there is no offer," he said.

Black Sand says its takeover bid already has financial backing "from a group sophisticated investors" led by Octavian Special Master Fund, LP and Pan-Jamaican Investment Trust Limited, as well as other Caribbean investors.

Black Sand, which is registered offshore in St Lucia, has also disclosed an alliance with Greystone Equity Partners Inc, which it refers to as its sponsor. Sources have otherwise tagged two well-known names in financial circles who operate in Jamaica and the United States as being connected to the deal.

Still an unknown company

Greystone is still an unknown company — its website is under construction and its Facebook page is equally blank, but it appears connected to Greystone Capital Partners, if only by their declared and trademarked motto, 'Positioning the Caribbean for Growth'.

The principals behind Greystone Capital, which calls itself a boutique advisory firm, are chairman Glegg L. Watson and Marcus K. Richards, founder and managing director.

The Lascelles stock has risen J$7 or more than two per cent to J$310 per share since the takeover was announced, thereby narrowing the premium to about seven per cent. Well-placed sources say, however, that the bid price will not be adjusted.

Meantime, Thornton says that, notwithstanding market whispers about the potential sale of the company and its businesses, no other offer was on the table - neither for Lascelles as a group nor singly for its most valuable asset, rum-maker J. Wray and Nephew Limited.

"Not to my knowledge," he said.

The Scotsman, who has a background in the whisky business, says he is at the beginning of a strategic review of Lascelles to determine its future direction, a job he insists comes with no preconditions and leaves all options on the table.

"There is no mandate at all," he said in a pushback on suggestions that he was given two years to determine how to package the companies for sale.

"My job here is to look at the group and recommend what the most appropriate strategy will be. I am working day and night on doing that."

Thornton has some familiarity with Lascelles having sat on its board since February 1, 2010. He was tapped by Trinidad earlier this year to replace McConnell, who resigned as managing director on June 30, after delivering another record profit of J$3.1 billion the year before.

McConnell was up to three years ago a substantial owner of Lascelles, but he and George Ashenheim opted to sell to Lawrence Duprey's CL Financial Group under terms that made it difficult to pinpoint the net gains made by the two men on the deal.

That friendly takeover eventually gave CL Financial 87 per cent ownership of Lascelles but 92 per cent control of its voting power through two sets of preference shares, which then fell into the hands of the Trinidad government after it rescued CL in January 2009.

Trying to buy back

McConnell and partners are now trying to buy back the listed company for US$370.574 million (J$32b), or about half the US$670-700m price paid by CL Financial.

Black Sand has offered US$3.86 per unit for at least 90 per cent of 96 million ordinary shares; US$0.29 per unit for all of the 10,000 6% prefs, and US$0.23 per share for all the 15% prefs.

Thornton steered around any comment on whether Black Sand's offer was reasonable, saying he would not speak for the owners and that any recommendation or assessment from Lascelles and its board would first be presented to shareholders via a director's circular to be issued after the Black Sand takeover bid is formally on the table.

"It's impossible to speculate on the price," he said, even while making the point that the offer was substantially lower than the CL buy price in 2008.

The Lascelles stock traded as low as J$220 in February 2010, after hitting J$610 at peak in 2008 during the execution of the CL deal.

Asked whether the current trading price undervalues the stock, Thornton said he would make no pronouncement on how the Jamaican market chooses to price companies, but added a rider that offered potential insight into his view of the Black Sand offer, which tracks closely with the trading price.

"The current market price does not accurately reflect what the owner paid," said the new Lascelles chief, whose main job up to this year was chief executive officer of CL World Brands, CL Financial's spirits marketing subsidiary based in Scotland.

The stock is currently trading about seven per cent above its estimated book value of J$297 per share.


Source:
Lavern Clarke, Business Editor
lavern.clarkegleanerjm.com
Jamaica Gleaner
Friday August 5, 2011

http://jamaica-gleaner.com/gleaner/20110805/business/business1.html