Did I read the Advocate editorial of May 17, 2007 correctly. Just one day after bashing the Advocate newspaper, unapologetically so, we fan the pages this morning only to be confronted by an editorial laced with simplistic analysis. At BU we regard the fact that Barbados’s only conglomerate being gobbled-up by the more cash rich Trinidadian conglomerate, Neal & Massy as deserving of studious analysis. The Advocate editorial makes the obvious argument that market forces in any capitalist market will make decisions with the objective of creating shareholder value. At BU we say brilliant and profound!

To hear the level of virtual panic in utterances from some people on the BS&T/Neal & Massy merger, one might imagine the Barbados partner was being swallowed up against its will. For all we know, the reported disproportionate shareholding may well justify the term take-over, despite assurance from BS&T’s chairman that the transaction, yet to be approved by securities agencies in Barbados and T&T, is a friendly merger of unequals; and that BS&T was not for sale.

Source: Advocate

BU would have anticipated that a more quality piece of journalism would have analyze and sought to project the fall-out from such a merger given the Goliath status of BS&T; after all its operations is weaved into the Barbados economy in almost all the sectors. Despite our boast of 90+ literacy Barbadians are not financial and investment savvy, this ignorance is exposed when matched against the Trinidad businessmen whose business acumen has been honed from years of functioning in an economy fashioned to serve the world.

Firstly Barbadians should accept that this transaction when approved by the shareholders and regulators must be viewed as a take over. BS&T is an ailing Group and has been for some time. Back in 2003 BS&T believe it or not owned 20% shares in Neal & Massy. However when it had to restructure the financially hemorrhaging motor division, it reduced this share holding to 9% to generate the required cash to offset the resulting write-offs.

Revenue and Net Profit of the BS&T Group improved over the previous year, with strong performances being experienced by United Insurance Company and Almond Resorts Inc. During the year the Group completed another phase of the restructuring of its automotive operations with the establishment of a new Company, Warren Motors Inc., in which it now holds 49%. Warren Motors will take over the operations formerly managed by BS&T Motors.Towards the end of the financial year BS&T reduced its shareholding in Neal & Massy Holdings from 20.1% to 9.2%. The capital gain achieved from this transaction was used partially to accommodate “write offs” incurred in the restructuring of the Motors division and other operations within the Group.Net Income attributable to Shareholders increased by 27%, while earnings per share showed a similar gain over the previous year.The sale of the Neal & Massy shares also had a positive Balance Sheet effect, as it allowed the Company to reduce its debt portfolio substantially.

Source: Neal & Massy

According to the most recent report BS&T shareholding has further dwindled to 3% while Neal & Massy’s stake in BS&T has risen to nearly 24%. Now does this smell like a merger? BS&T really has no choice but to go along with this transaction or face a hostile take over. A check of the Trinidad controlled Sagicor Insurance Company shows that it too has a significant holding in BS&T. It does not take rocket science to deduce that Neal & Massy has the means to support a hostile bid. BU does not intend to focus on the transaction of the take-over because market forces must be allowed to dictate whether the transaction will close or not. However the current public debate must be heard and place in proper perspective. The wholesale acquisition of choice Barbadian properties cannot continue unchecked or we risk being denationalized and “de-culturized”.

Our bashing of the Advocate must continue because the thrust of its editorial scoffed at the Barbadian public cry of concern at its lone conglomerate being snapped-up like a dog would a bone. The Advocate needs to appreciate that although Barbados cannot stop market forces directly; the one way “grabbing” of undervalued companies like BS&T must be of concern. The very high level of Trinidad investment in Barbados and the uncompetitive status of Barbadian companies clearly points to the fact that as a country we must seek to enable our business environment by implementing measures which would ensure that our leading companies are securely capitalized.

The obvious start is for the government to put incentives in place to promote private venture capital financing. So to the Advocate we urge you to call a meeting of your editorial staff immediately, the objective –to chart a new direction, and abort your current feeble attempt at journalism.