BHL shareholders reject directors’ advice
Baffled and disappointed!
That’s the reaction of the Concerned Shareholders of Banks Holding Limited (BHL) as the two-way, hostile take over bid for the island’s largest beverage manufacturer took a new twist today.
The group is demanding answers from BHL directors after they issued a circular last evening recommending that the shareholders accept the $5.60 per share offer issued by SLU Beverages Limited, which is owned by AMBEV.
That bid is $0.40 lower than the latest $6 offered by Trinidad and Tobago conglomerate ANSA McAL through its subsidiary A.M. Caribbean Development Ventures Ltd.
According to the circular, company directors G. Anthony King, Elvin Sealy and C. Richard Cozier, along with BHL Chief Financial Officer Naresh Karnani, have “all declared that their intention is to accept the SLU amended offer”.
The BHL directors in fact warned of “a negative impact” on the company, the shareholders and its employees, suggesting that SLU had the upperhand in light of rights guaranteed under a convertible debt purchase agreement (CDPA).
That deal saw SLU providing a $28 million loan to BHL in June 2010 to build the new brewery in Newton, Christ Church.
The agreement specifies that if any person or group becomes the direct or indirect ultimate owner of BHL shares, representing more than 25 per cent of the total voting power in BHL, then “SLU has the ability to require BHL to re-purchase the 13,250,000 common shares at $10 per share, which shares were issued to SLU on conversion of the debt in 2010.
“Another bidder must therefore take into account that in the circumstances of succeeding in its takeover bid, SLU can invoke the above clause which may have a significant financial impact on BHL. The additional potential cost to a bidder [other than SLU] to finance such would be the difference between $10 and the final purchase price for BHL’s shares for each of the 13,250,000 shares [representing 20% of BHL] issued on conversion under the CDPA. Additionally, the remaining debt to SLU of US$1.5 million could itself potentially generate an additional payment of BDS$4.5 million,” it warned.
They further observed that it was possible that the Fair Trading Commission, which issued a letter to BHL on October 22 reminding the company to notify its shareholders of the legislation under the Fair Competition Act, “may not allow the successful bidder to grow Barbados market share through the combination of the Banks brands with those of the their own”.
Directors further noted that exports from Barbados were not likely to present the same concern.
They concluded that BHL businesses would fare better if AMBEV took over.
For instance, the BHL directors claimed that the Brazilian company was better placed to ensure that BHL retains its Coca Cola bottling rights.
“Given the relative sizes of the two corporations and the influence each may bring to bear, we consider that Ambev appears to be better placed to deal with the Coca-Cola company, particularly given the new development reported in the media whereby AB-Inbev [Ambev’s parent] is in the process of acquiring SAB Miller, which has substantial Coca-Cola bottling ventures in Africa.”
On the matter of brewing, the BHL directors also said that the Banks brand was more likely to expand under AMBEV, which presently does not have a significant market share in the region, compared to ANSA McAL.
However, the Directors’ views have only drawn the ire of the concerned shareholders who questioned whether the BHL board had their best interest at heart.
“Why would the BHL Board think it is in the best interest of its shareholders to accept a lower offer, than is currently on the table?
“In addition, has the BHL board fully taken into account AMBEV’s track record, of their destruction of indigenous brands and anti-worker history?”
The group was adamant that it would continue to examine the two bids, even as it suggested that it was leaning towards the Trinidadian conglomerate.
“When we examine both companies with bids on the table, we are inclined to go with the highest bidder. However, we agree that it important that both companies be closely scrutinized. We are doing that and are still not convinced that AMBEV has our interest at heart.”
Meanwhile, ANSA McAL has also fired back, acknowledging it was aware of the Directors’ circular.
“We wish to advise all registered shareholders that ANSA’s unconditional offer of $6 stands,” said Nicholas Moutett, president and chief executive officer of ANSA Mcal Barbados.