And the talk continues! Where is the intervention going to come from?

No to $25.70

By Trevor Yearwood | Thu, December 23, 2010 – 12:08 AM

The Barbados Association of Non-governmental Organisations (BANGO) has told shareholders in the local power company to reject a whopping $25.70 Canadians are offering for each share.

However, the Barbados Association of Corporate Shareholders says it would prefer Barbados Light & Power (BL&P) shareholders to have a chance to own shares in the Canadian company Emera Inc. rather than a deal that would see them “wiped off the books”.

On Monday, Emera Inc. opened its offer to shareholders in Light & Power Holdings, the parent company of BL&P, to purchase all issued and outstanding common shares.

“If there is one criticism I have it is that acceptance of this offer will wipe out about 2 200 individual Barbados Light & Power shareholders,” president of the Barbados Association of Corporate Shareholders, Douglas Skeete, told the DAILY NATION yesterday.

“It would be good if the proposed buyer had offered a share exchange. They could have maintained the $25.70 price but give local shareholders the equivalent in shares in their company, which is listed on the Toronto Stock Exchange.”

Skeete added: “It would mean than when they are paying dividends, we would get a Canadian cheque, and that’s foreign exchange. So we are not only boosting Barbados’ foreign exchange position but also expanding our ownership of companies outside of Barbados.

“There can also be a mixed offer, where you get part of the $25.70 in cash and the remainder in shares in Emera Inc.”

BANGO, one of the agencies which fought against BL&P rate hike proposals this year, urged shareholders to “reject outright” the Emera Inc. offer.

“Unless we have a plan to move to alternative energy, and swiftly, in which case we no longer will have a use for the electric company, we shouldn’t sell Barbados Light & Power,” BANGO’s head Roosevelt King argued yesterday.

“What you will get $25 for today will be worth $50 tomorrow. But if we sell our asset now, we could find ourselves being squeezed by the Canadians down the road, when we are at their mercy.”

King said Barbadians needed to understand that money was not everything and there were some things that should remain in local hands.

“The money being offered by the Canadians may look very attractive, but the money is not the important thing – it’s the resource. If we do not take care of our resources, who will do it for us?”

However, Skeete said he did not buy the argument against foreign investment in local companies.

“Some people say Light & Power is a monopoly utility company and Government should not allow it to fall into Canadian hands,” he noted.

“If we stop other investors from buying our companies, we will run the risk of foreign governments retaliating when our companies try to expand overseas by acquiring businesses.”

In relation to Barbados Shipping & Trading Company Limited and Barbados Dairy Industries Limited:

http://news.barbadostoday.bb/barticle.php?cat=01newslocal&artdate=2010-12-22&article=826

@All. Just in case you haven’t seen the article in today’s Nation “News”: “No to $25.70”; http://www.nationnews.com/index.php/articles/view/no-to-25.70/

I love working with these guys….

A repost from Barbadostoday:

2011-01-03

by Rawdon Adams

Come 24 January Barbados Light & Power Holdings is set to pass into foreign hands.

In an era when some nations block foreign takeovers of even yogurt makers on the grounds that they are "strategic assets" (as France did when Pepsi wooed Danone in 2005) it is surprising to see the truly strategic BL&P up for sale to a foreign buyer with so little reaction from the Barbados Government. It does, after all, control nearly one quarter of the company’s equity via the National Insurance Scheme.

This is not an ideological position (as was the case with the strategic yogurt). Nor is it a chauvinistic one – BL&P is a utility which has already spent long periods under Canadian control. Rather, it is about voluntarily relinquishing, or potentially relinquishing in the absence of safeguards, powers to optimally balance public good against private, monopolistic enterprise in the furtherance of national development.

Indeed, how Barbadians came to majority ownership of the utility in 1980 is principally a story of government investment in a private company for the purpose of national development. That kind of control was necessary to deliver a net public benefit – and who is to say it will not be needed again?

As Canadians recognised last year when blocking the takeover of Potash Corporation by BHP Billiton as not in the country’s interest, some assets require persistently heavy, taxpayer-funded capital investments over many years before emerging (perhaps) economic, or "strategic" or of net public benefit. Potash exploitation fits that bill. As does building long term energy infrastructure. Stepping in once the costs have been sunk is an understandably attractive option for buyers.

Still, the offer does seem generous – the local bourse prices BL&P at less than $13 per share and Emera is ready to pay $25.70 per share.

There are only two ways to value a company: either on a fundamental basis, by toting up its assets and taking away its liabilities to arrive at its net asset value; or on a relative basis – that is, compared to similar (or alternative in this case) investments. Everything else is negotiation.

If one were to build a BL&P from scratch, not only would it take years, it would also cost over $36 per actual BL&P share as per the aforementioned NAV calculation. $36.26 to be exact – and it is against this number that the $25.70 must be measured.

Local investors were obliged until now to consider the merits of BL&P on a relative basis. For most this means comparing the dividend yield relative to others on offer locally. There was little point in looking at net assets for there has not, pre-Emera, been an interested buyer rich enough to realise anything near the replacement cost of a small-island, monopoly utility with limited growth opportunities.

The Government, on the other hand, is not obliged to consider the value of its investments in either way: it must consider more than the impressive 30 per cent discount to NAV Emera is asking against full control; more, too, than the windfall for the NIS. The primordial issue is in fact whether the state is about to subcontract out some of its fate that it had hitherto been crafting itself.

In another age a government of the ascendants of the French yogurt makers above was described as having forgotten nothing and learnt nothing – ultimately to its cost. Let history instruct in this New Year.

Perhaps this transaction is truly of net public benefit. But at least have a parliamentary and national debate worthy of the name.

* Rawdon Adams is the son of former Prime Minister, the late JMGM "Tom" Adams.

The reasons provided by Adams about the Canadian Gov’t blocking the takeover of Potash Corp. by BHP Billiton is off the mark. Canada has a minority Gov’t and the proposed takeover was vigorously opposed by the Provincial Gov’t in Sakatchewan where the mine is located. Public sentiment against the takeover was also very high among the residents of that province.The ruling Conservatives hold 17 of 18 seats from Saskatchewan in the Federal Gov’t at present and given that they hope to elect a majority Gov’t in the next election their hopes would be dashed if they allowed the takeover to proceed.

The rejection of the takeover bid goes against everything that the present Canadian Gov’t stands for as their philosophy is more akin to Republicans in the USA when it comes to free enterprise but in the end political considerations won the day.

All politics is local

@Chris

A case of the calf now getting fat perhaps?

The following comment was received by email:

Emera clearly views BL&P as undervalued and are willing to pay a premium for controlling interest. The controlling interest is the problem I would have. Bajans are supposed to be intelligent people who make smart decisions. This is one of those moments to make a smart decision.

I happen to agree with rawdon adams.I think the government who has 25% shares in the BL&P should come out and condemn that sale.

Just in case you didn’t read this (Nation News; back page)…

http://www.nationnews.com/index.php/articles/view/worry-not/

Peter Williams, the Managing Director of Barbados Light and Power (BL&P), is reported to have said that “Barbadians have nothing to fear about foreign ownership of the Barbados Light & Power Company (BL&P).

Mr. Williams. With all due respect.

I, as a Bajan, would fear having a critical utility 100% owned by a foreign entity, and thus being able to request delisted from our stock exchange, and thus not required to submit audited annual financial reports available to the public.

But… I do appreciate that you and your team monitor the blogs….

@BU.David: “What do you expect these guys to say?

Exactly what they are saying.

And, for the record, I know and like Peter and his team.

@David: “There is a windfall of extraordinary proportion to be had.

Agreed.

But is this a windfall for the long-term minority investors of BL&P, BL&P’s executives, or a foreign entity?

Only time will tell.

@Hants: “Bajans in Canada can buy shares in Emera which traded today at $31.77 on the TSE.

Thanks for that Hant. (Sincerely.)

Can Bajans in Barbados buy shares in Emera? (A question raised by Skeete and Williams.)

A separate question: when was the last time a trade in BLPH occurred on the Barbados Stock Exchange?

Hmmmmmm….

RJH Adams

Correction: 13 of 14 elected MPs from Saskatchewan are members of Harper’s caucus not 17 of 18 as I stated.

Attached is a G&M Editorial which casts doubt on the “net benefit to Canada” reason for turning down the offer.

I agree that perhaps the issue of a foreign takeover of BL&P should be more widely ventilated as it can be considered a monopoly. Usually public discussions on these matters are driven by Parliamentary debate but last time I checked the subject has not been raised in Parliament. Perhaps the Parliamentarians don’t think it makes a difference whether control of the Utility is in local or foreign hands.

Number crunching aside, in the absence of an active stock market in Barbados I think that the average investor would find it difficult to turn down the opportunity to sell their shares at the price offered.

http://www.theglobeandmail.com/news/opinions/editorials/potash-investment-friends-with-net-benefit/article1800040/

http://www.theglobeandmail.com/news/politics/potash-takeover-failure-blamed-on-billion-dollar-pledge-requirement/article1800044/

@BU.David: “It is at times like now we truly understand who controls Barbados.

With all due respect David…

I would argue that it is times like this when we can sample the true resourcefulness and positions of Bajans.

Let’s see what happens….

Only way this become a platform issue is if the pm announces what they plan to do with their shares before jan 20. I expect there to press conference on the 24th saying they going to sell their shares.

@anthony

The opportunity is there for the Opposition to make this an issue as well? Given Arthur’s record of allowing Bajan companies to be gobbled up it would be an about turn. We really need to explore the emotional argument here.

First and foremost, the Democratic Labour Party Government must not sell the NIS shares in Barbados Light and Power to anyone. They must not make the same mistake they did when they sold Government’s shares in Cable and Wireless a few years ago. They must take the same excellent stance they have taken with regards to the sale of Government shares in BNB.

We are now being told by Barbados Light and Power Managment what a wonderful opportunity it would be for Barbadians to surrender complete control our electricity to Canadians. The Managers at the Barbados Light and Power no doubt stand to make millions of dollars in bonuses if they can pull off this scam on Barbadians, but they are not telling them that.

This is the same lying Managment team at the Barbados Light and Power who lied to Barbadians by telling them how cheap electricity would be once they installed two new generators at Spring Garden. Far from getting cheaper electricity Bajans are now paying more than ever for electricity. Light bills are now like morgage payments. They lied to us then. Now they are lying to us again about EMERA. The words of the Managment of the Barbados Light and Power are not to be trusted if the past utterences from them are to be considered. If they tell you to walk then you should run.

EMERA , from persons who live in Canada, has a poor track record of maintenance, they charge the highest for electricity, and even a high wind puts their electricity supply out of service. Is this the type of company that we want? The share holders in the Dominican Rep. foolishly sold all their shares to an overseas company, now they are plauge with nightly rolling blackouts and there is nothing that they can do about it. Do we want a similar thing here in Barbados?

Also to be considered is the fact that someone on this blog posted that Barbados Light and Power shares are really worth about thirty six dollars, which means that on the stock exchange they maybe undervalued. If this is so then Barbadians are being taken for a ride. EMERA may well be getting a hell of a deal at what they are offering.

Barbados Light and Power Company should never be one hundred percent owned by any overseas company.

Have we no pride? What next are we going to sell to overseas interests? Bridgetown and and charge a toll to enter it.

Anthony

Speak for your self.

Even when there is a dip in the price of fuel the reduction in electricity cost to ME the consumer is so small thatI need a microscope to see it.

Emera lays off workers http://bit.ly/h3uCAz