Est.2007

Barbados Underground

Bringing News and Opinions to the People

Are Companies Listed On the Barbados Stock Exchange Seriously Undervalued and Vulnerable To Cheap takeovers?

← Back

Your message to the BLOGMASTER was sent

CONTACT THE BLOGMASTER ONLY

Submitted by Dr. Justin Robinson
Dr. Justin Robinson
Dr. Justin Robinson

On Tuesday September 22 2015, approximately 20% of the shares in Banks Holdings Limited (BHL) were acquired by SLU Beverages Limited (‘SLU’), a St. Lucian company. When combined with BHL shares […]already held by SLU,

the above-mentioned transaction resulted in SLU owning approximately 40% of the shares in BHL. SLU is majority owned by Companhia de Bebidas Das Américas – AmBev (‘AmBev’), which is controlled by Anheuser-Busch InBev. AmBev is the largest brewery in Latin America and the fifth largest in the world. Ambev operates in 14 countries in the Americas and its portfolio includes beers like Antarctica, Brahma, Bohemia, Skol, Stella Artois and soft drinks like Guaraná. As the largest PepsiCo bottler outside United States, it sells and distributes PepsiCo products in Brazil and other Latin American countries.

On September 22 2015, Ambev purchased 13,170,728 BHL shares traded at $4 per share, paying approximately BDS$52,682,912.00. On that date, BHL’s share price on the stock exchange was BDS$2.49 per share. AmBev therefore paid a substantial premium of about 60% over and above the most recent stock market price on the Barbados Stock Market. However, BHL’s Balance Sheet for the nine months ended May 31 2015, valued the shares at BDS $4.81 each. The Balance Sheet reports shareholders’ equity of BDS $311,812,000, and with approximately 64,853,760 shares outstanding, the book value per share was approximately BDS $4.81. Therefore, on September 22 2015, BHL’s balance sheet valued the shares at BDS $4.81 each, the Barbados stock market valued the shares at BDS$2.49 each, while AmBev was willing to pay BDS $4.00 per share. Is AmBev really paying a premium or getting a steal of a deal? They are paying sixty percent more than the stock market valuation, but paying a 20% discount on the book value of the company.

The balance sheet value of the shares or what is termed the book value per share, is typically viewed as a backward looking measure based on the book value of the companies’ assets and liabilities. It does not account for the market value of assets and liabilities or future earnings potential. The stock market valuation is supposed to do that, and reflect the book value plus future growth potential. When you sell a company you not only sell the company as is but you also sell the future growth potential, and investors normally expect to be compensated for such, and buyers typically pay a premium.

On the surface the stock market price of BDS$2.49 compared to a book value of BDS $4.81 suggests that investors on the Barbados Stock Exchange view the future growth potential of BHL as being negative. Companies’ shares being sold at prices below their book values is extremely rare on most stock markets and is typically associated with companies in financial distress and facing bleak futures. I doubt investors see a bleak future for BHL and negative growth potential. I think the low market value is due to the infrequent level of trading on the Barbados Stock Exchange. Stock prices only change when trades of a certain volume are made. The infrequent trading means that stock prices are not being regularly updated to reflect the current book value and future growth potential of companies. Stock market prices only come close to reflecting the true value of companies if there is sufficient trading by informed investors. I am sure we have lots of informed investors in Barbados and the Caribbean, what we appear to lack is sufficient trading, or a group of what economists call “marginal investors”. Marginal investors are investors who are willing to buy and sell shares regularly at prices based on their estimates of the future direction of a stock price. Marginal investors are typically institutional investors such as mutual funds, insurance companies and other professional investors.

Why with so many informed and sophisticated institutional investors is there such infrequent trading on the Barbados Stock Exchange? Is this lack of marginal investors leaving companies on the Barbados Stock Exchange seriously undervalued? If this is so, investors are unable to reap the full benefits of their investment and companies are vulnerable to cheap takeovers. Why should I buy shares when market prices only approach realistic levels when there is a takeover bid? Why should local companies be sold at relatively low prices because of consistent undervaluation on the local stock exchange? Oh for some marginal investors! There are many more companies on the Barbados Stock Exchange trading at below book value.

Discover more from Barbados Underground

Subscribe to get the latest posts sent to your email.

198 responses to “Are Companies Listed On the Barbados Stock Exchange Seriously Undervalued and Vulnerable To Cheap takeovers?”

  1. Atrue Freeman Avatar
    Atrue Freeman

    The directors’ role in a takeover bid seems much more important than the undervalued share price reflected on the stock exchange in Barbados. When a valuation of the target company is commissioned and received by its directors in response to a takeover bid, the shareholders get an indication of the underlying value, though not determined by markets forces. Shareholders in the main tend to place a lot of trust in the directors and accept any recommendation by the directors to accept the price being offered. At this point, however, the directors appear not to fully understand their responsibility to the shareholders that are being asked to sell their shares. As long as the directors are willing to recommend a sale, there is no reason why the best price should not be sought, including seeking alternative bids. Having observed how previous takeover bids played out in Barbados, some boards of directors seem to have other priorities.

  2. Bush Tea Avatar
    Bush Tea

    This is a FIRST CLASS submission and typifies the kind of analyses that should be ROUTINELY coming from Cave Hill if it was a ‘real real’ university … even from graduate students.

    Thank you Justin…. and thanks to BU for kicking your butt to elicit such feedback.

    Bajans are just not smart enough to realise how they are being taken for a ride by these companies.

    Justin, there are SIMPLE reasons why share prices are kept artificially low by these Directors (actually usually by a few select directors , since most are just clueless ‘yes-men’)

    1- IT DISCOURAGES PUBLIC (BLACK) TRADING. For 20 years BL&P shares were about $9 until it suited the directors to INITIATE its sale – then a foreign company OFFERED $25 and all indications are that the actual worth was about $36.
    Had stock market share price reflected true value, MANY MORE bajans would have sought to purchase shares (further increasing demand and value)
    The REAL WORLD value of BL&P shares therefore would be more like $50

    2 – It holds on earnings that should have RIGHTFULLY accrue to shareholders – as ‘retained earnings’ under the control of the directors / controlling interests. That way, they get to spend these funds as they see fit….often via questionable investments in shady businesses that THEY control.

    3- The BL&P directors were so foolish that they sold the company WITH massive reserves that rightfully should have been paid to shareholders over the years as dividends AND with other cash savings in the form of self-insurance, that were probably enough to fund the purchase by EMERA.
    In short, they GAVE it away.

    QUESTIONS…
    Why is the department of Management not routinely publishing such analyses?
    What the hell does the Stock exchange people actually do?
    What purpose does the FSC do besides harass Credit Unions?
    What is the point in having a DPP?

  3. David Avatar
    David

    BHL shareholders have been advised to wait on a communication from the Board before responding.

  4. Artaxerxes Avatar
    Artaxerxes

    Bush Tea October 2, 2015 at 7:28 AM #

    “This is a FIRST CLASS submission and typifies the kind of analyses that should be ROUTINELY coming from Cave Hill if it was a ‘real real’ university … even from graduate students.”

    Bushie, wha you mean by if UWI Cave Hill “was a ‘real real’ university?” You writing a lotta shiite, yuh. Why you hate we suh much………. Wha de **** we do you?

    You always coming to this forum to criticize UWI and its alumni. Look, as a proud graduate of UWI Cave Hill and Mona, I gine tek dah whacker you got (if it wukking) and gine whack you, yuh.

    Bushie, gih we a break, nuh….. If we don’t comment yuh criticize, if we comment yuh does still criticize. Shiite….. wuh we do you? You does attack we like how Alvin Cummins and the other ACs does attack the BLP.

    Bushie, you better watch you brass bowl steps, yuh.

  5. Bush Tea Avatar
    Bush Tea

    @ Artax
    To whom much is given… much is expected.

    You could believe that Dr Robinson can produce this level of analysis that REALLY GETS TO THE HEART of what is wrong with Bajans investing in their own country….. and David (BU) had to extract it like a dentist?
    …or that Sir Cave ha FINALLY got back to explaining REALITY to Bajans?

    Bushie don’t waste time whacking people with nothing to contribute… But all like wunna so who OBVIOUSLY have the talent ..and got it hidden under bushes ….. wunna asses belong to the whacker… 🙂

    Considering what wunna UWI jokers COULD HAVE contributed to this country in exchange for the BILLIONS of dollars invested in wunna, Bushie has been going EASY on wunna asses so far Artax…

    You better watch YOUR ass …before Bushie loads up some REALLY big size string in the whacker… LOL

  6. Violet C Beckles Avatar
    Violet C Beckles

    Slavery never stops in Barbados,Nigger haven , and the people will get the VAT with no V , just the AT . that will leave Barbados on Li-AT. This island full of suckers selling what they do not own , So all things will go cheap,OH , Oh Oh “Money changes hands “so it all legal , best words heard in Barbados when land moving and being wash in the CB,

    AG what?, fraud squad what? law what? police what? . more FFFFFing PAIN to come , you all better listen and get your food right,
    Bajans Suckers for Life, Land Fraud at all root.

  7. David Avatar
    David

    @Dr. Robinson

    Several questions were asked if you on the two NIS blogs posted earlier. What is the state of the fund vis a vis:

    Expense rising faster than inflow

    The state of the Financials as promised 3 years ago

    The lack of foreign earning capacity to give the fund access to diversifying and invest overseas.

    The state of IT and the capacity to deliver on SLA read payments on time.

    Just a few questions to start the ball rolling.

  8. Smooth Chocolate Avatar
    Smooth Chocolate

    most Barbadian are not too familiar with the stock trade so therefore there would be a lack of interest. it is surprising that the book value is almost double the market value and anyone seeing this would come to the conclusion that the company is in distress but someone looking to do a hostile take over would grab it up. it is a pity that we Barbadians would not educate ourselves on hostile take overs even tho it happens everyday, if the shareholders of BHL were not so greedy and more vigilant, they would have perceive that a hostile take over was probable and would have taken safety measures against it. i believe that it is only a matter of time before it happens, 40% of shares is alot, all they need now is at least 11% more and they own the Banks Holdings.

  9. Justin Robinson Avatar
    Justin Robinson

    Benefit expenditure is rising as the population pyramid goes through a rapid shift (an older population). Contribution and investment income are more than adequate to cover benefit expenditure. The actuaries are not recommending further reform at this point. The asset base provides decades of extra cover. But all schemes such as this one have to engage the issue of reform periodically.
    Financials had fallen really far behind, more than a decade. The special project has resulted in the financial statements being brought up to 203/2014. Since NIS is a government department and not a statutory corporation the audit is the responsibility of the auditor general. These have been outsourced to Ernst and Young because of the huge backlog. The audits are going slow because of challenges in auditing transactions well over a decade ago. Steady but slow progress is being made.
    NIS would like to increase overseas holdings to diversify the fund, but access to forex is outside our control. We continue to seek forex and other diversification opportunities.
    IT system is complex, we are struggling with a major upgrade,mane I am an IT novice. The new system is settling down, long term benefits are being handled quite well, there were schallenges with some categories of short term benefits but alot of progress has been made with resolving these challenges. A special project is dealing with the backlog of short term claims.

    Probably as much as I can say without ending up like Phil Simmons

  10. David Avatar
    David

    Thanks for the update Dr. Robinson. Your last point about the scarcity of forex that has served to dampen foreign investment and therefore increase the risk profile of the fund begs a follow up question:

    When the decision was made to dump NIS holdings in EMERA, why did the NIS with the blessing of government not leave those funds outside the country in the form of an investment?

    And you shouldn’t worry about Simmons because while on the surface what he did was to betray custom, he has provided an insight and confirmation to what ails WI cricket.

  11. Donna Avatar
    Donna

    Smooth Chocolate,

    Some of us understand but are not experts so we have nothing to add. We just read and follow.

  12. Atrue Freeman Avatar
    Atrue Freeman

    What is the possibility that the recent sale of approximately 20% of BHL by Massy to SLU was agreed back in 2010 when SLU purchased its initial 20% in BHL? We have not seen anything from Massy that suggests Massy had an updated valuation of the BHL shares for the recent sale. The price per share that Massy received in 2015 was the same $4 at which SLU purchased its first 20% in 2010.

  13. David Avatar
    David

    @Atrue Freeman

    And we will never know.

  14. Atrue Freeman Avatar
    Atrue Freeman

    David, yes. But, if so and SLU’s initial investment came with an option to purchase Massy’s interest in BHL, the option would only be exercised if SLU’s current assessment is that the value of BHL is above the option price, which would be good news for the other shareholders.

  15. David Avatar
    David

    @Atrue Freeman

    Looking pass the transaction could it that SLU plans to mirror what Diageo did in Jamaica when it bought Red Strip? If yes you are right, good news for shareholders and governments but…

  16. de Ingrunt Word Avatar
    de Ingrunt Word

    @Dr Robinson, that was a lovely coda there re Phil Simmons but whereas you both are skilled and talented in your respective fields it’s fair to say that Simmons was always prone to be impetuous when a graceful and non-combative stance was more suited. Unfortunately that’s why during his career he was badly hurt by bouncers. He didn’t duck gracefully when that was the more practical course of action.

    You on the other hand do not come across as an impetuous type of guy. It seems to me that you appreciate quite well the nuance of ducking.

    Based on your scholarship and past research/writings on this subject of corporate governance/stock valuation etc I humbly suggest a bit of self serving in your contention : “Why with so many informed and sophisticated institutional investors is there such infrequent trading on the Barbados Stock Exchange? Is this lack of marginal investors leaving companies on the Barbados Stock Exchange seriously undervalued?”

    In a frank, simple and honest appraisal you are sophisticated enough to know that although the BSE provides a trading environment there is no real operational environment to do REAL volumes of business or a ‘churning’ momentum on the local stock exchange.

    Is Options selling even done locally? Of course it must be possible I assume to take a short position on a stock but realistically are there mechanisms to actually facilitate it, for example?

    And I am certainly not trying to be unkind or disparaging re our still embryonic stock exchange; just highlighting the point that it’s rather bare bones and there is limited scope for traders to really by and sell with the so few stocks available.

    An additional question to you re “Companies’ shares being sold at prices below their book values is extremely rare on most stock markets…”

    Based on your assessment of the large number of sophisticated investors why do YOU think that more of them (corporate and individual) have not bought more shares of these undervalued local companies?

    I am intrigued on why haven’t other regionally sophisticated investors (individual) not done so too?

    Why haven’t institutional investors like an NIS or Credit Unions not made large stakes in these investment opportunities…surely the long term return on money will be higher than from the banks?

    What has your research shown on why there are so few (or none) Investment Bankers (local/regional) who have been formed to capitalize on your exact point of these “companies ….seriously undervalued”?

    Why don’t we have at least one ‘BlackRock’ type company bout de place?

    I appreciate it when men of your local gravitas take the time to engage here on BU so my comments are to get your learned feedback and become more informed. No intent to condemn or criticize if any perceived!

  17. Walter Blackman Avatar
    Walter Blackman

    Walter Blackman September 19, 2015 at 12:30 PM #
    David,
    “At the end of 2011, the NIS investments stood at $3.7 billion. Out of this $2.2 billion is owed by government. Government can only pay this money one way – it has to levy taxes.
    Workers paid for their NIS benefits through contributions. To receive their pensions, they must now pay for them again through taxes.”

    Justin Robinson October 3, 2015 at 7:38 AM #
    “Contribution and investment income are more than adequate to cover benefit expenditure……..
    The asset base provides decades of extra cover.”

    Dr. Robinson,
    Please bear in mind, that at the end of 2011, out of a “potential” fund of $3.7 billion, government has imprudently borrowed, wasted, or frittered away $2.2 billion. The government simply does not have the capacity to get back this $2.2 billion in the near future by raising taxes. Perhaps, the NIS will never get back this money. That was at the end of 2011. I believe the situation has worsened since then.

    To make sure that the people of Barbados get a very good understanding of what is happening, I have to ask you a few questions:

    When you say that “Contribution and investment income are more than adequate to cover benefit expenditure”, do you mean that the Government of Barbados (the major borrower) is actually putting physical cash, month after month, back into the NIS to cover the investment income it owes to the fund? Or is the government portion of “investment income” just a book entry?
    Certainly, the investment fund of $3.7 billion is just a “book entry” amount. $2.2 billion of it might turn out to be worthless government paper. To get an idea of the magnitude of the risk posed to the fund by government borrowing, do you have an idea of how many “decades of extra cover” the fund would have if Government is unable to repay?
    A few years back, you appeared with Ian Carrington, the Director of NIS in the local press in connection with NIS funds being invested in a government building at Warrens. You quoted a rate of return that the NIS fund will get on the investment and said that the rate was in keeping with (or higher than) that recommended by the actuary. Did the actuary recommend that NIS funds be borrowed by government at high interest rates? Or, given the threat Government borrowing posed to the NIS fund, didn’t the actuary advise that government borrowing of NIS funds be stopped?

  18. David Avatar
    David

    @Dee Word

    I appreciate it when men of your local gravitas take the time to engage here on BU so my comments are to get your learned feedback and become more informed. No intent to condemn or criticize if any perceived!

    Agree with you when these muhguffies, Walter included, show courage to enter BU and blind us with their intellect.

  19. Bush Tea Avatar
    Bush Tea

    In all fairness Walter, Dr Robinson is speaking as Chairman, and as such his language must of necessity reflect that reality.
    It is for the discerning among us to draw sensible conclusions.
    Obviously his ‘release’ above has been well thought out and probably vetted by his PR people as to the best verbosity and terminologies to utilise….

    No point in grilling him as if he were an anonymous blogger… and in any case it is not fair.

    That said, it is obvious that his spin is overly optimistic by FAR…. You CERTAINLY don’t expect him to say that the S2.2B is at the bottom of Maxwell pond … and that if we don’t watch the Stinkliar carefully, the other $1.5B may be on Hastings road on the way up too….

    Basically what the Doc said is that….

    Our goose is cooked….
    Our ass is grass…
    however..
    Unlike the Government ministers, he said it with a degree of flair and professionalism.

  20. Walter Blackman Avatar
    Walter Blackman

    Justin Robinson October 3, 2015 at 7:38 AM #

    “Financials had fallen really far behind, more than a decade…….. Since NIS is a government department and not a statutory corporation the audit is the responsibility of the auditor general. These have been outsourced to Ernst and Young because of the huge backlog. The audits are going slow because of challenges in auditing transactions well over a decade ago.”

    Dr. Robinson,
    Was anyone recommended to be fired for this unwholesome, embarrassing, and unsatisfactory state of affairs at the NIS?

    Was the huge backlog of work put out to tender? Or was Ernst and Young handpicked? We are spending millions of dollars annually to educate Barbadians, and we are producing competent, gifted professionals in all areas. Was an attempt made to ascertain whether or not there are Barbadians qualified to do this work?

    How much money has been paid to Ernst and Young so far? What is the expected total bill?

  21. Walter Blackman Avatar
    Walter Blackman

    Bush Tea October 3, 2015 at 10:18 AM #
    “In all fairness Walter, Dr Robinson is speaking as Chairman, and as such his language must of necessity reflect that reality.”

    Bush Tea,
    I know that Dr. Robinson is speaking as Chairman of the NIS, and I commend him for “speaking”. I am not attacking or grilling Dr. Robinson personally. I am a taxpayer of Barbados and I am overly concerned and anxious about the long term viability of the NIS, given the level of government borrowing from the fund.

    I need answers to my questions, so I can only hope that Dr. Robinson seek permission from the Minister to provide them. He and the Minister are not paying the people of Barbados. Au contraire, the people of Barbados are paying them, and it is about time that we stand up and demand competence and accountability!

  22. Bush Tea Avatar
    Bush Tea

    @ David
    We have a catch 22 situation here Boss….
    As long as the idiots are in charge, we are doomed.

    It matters NOT that they may entice a few intelligent men to chair their Boards. Dr Robinson (from his incisive analysis of the Banks situation) clearly understands the current crisis we face, however by accepting a position as Chairman, his hands are tied by protocol.
    If he were to come out with the truth, (as Walter has the capacity to force in this forum) then he cannot continue as Chairman and they will appoint Hal Gollop to that position too…
    On the other hand, if he ‘scotches’ and comes with diplomatic shiite talk, The BU assassins – (excluding Bushie of course who is a very reasonable blogger 🙂 ) will eat him alive…

    RESULT:
    …he will disappear, and we will be all be losers for his obvious knowledge and research capabilities.

    Same shiite with our legal friend Jeff.
    As soon as the next FTC issue heats up he will find himself in the same exact position.

    The SOLUTION of course is to place the horse BEFORE the damn cart….. or in other words, get rid of the jackasses in charge and place the INTELLIGENT capable people in charge. That way, people like Justin and Jeff and Walter can speak their HONEST mind …. like Barrow, Tom and Henry Forde used to do….

    You can’t make jewellery out of a pig’s ear…
    and you can’t make a horse out of a j(AC)kass…

  23. de Ingrunt Word Avatar
    de Ingrunt Word

    @ Atrue Freeman, you brought this matter to BU and that’s a good thing. So surely you must have perused the Fin Reports to get a perspective of the situation.

    Your question is answered quite clearly in the 2011 Report (p48).

    So yes SLU definitively had a convertible equity option way back in 2010. The entire fracas raised by Doug Skeete and the good Prof at UWI stemmed from the special rights being given to SLU as a shareholder.

    The price of $4 was the projected ‘conversion’ price noted back in 2010. And remember the actual publicly traded price was likely lower that what was offered. But at that time the BHL price in their financials was actually slightly higher @$4.13.

    Remember though that has been professionally affirmed here by Artax it’s quite normal to have a discount offered with large private placements like this.

    Also in the press release shown on BU. It was noted that an independent stock price analysis is to be conducted before a final sale.

    So there is really no mystery or dishonesty here prima facie the operational interface re the private placement/conversion/sale price.

    The subterfuge and shenanigans are related to how the Board has effectively usurped other shareholders’ power with their conventions to SLU/In Bev re this share ownership. Although they were just ‘ordinary’ shareholders they demanded and received a stipulation that as promissory note convertible loan offerors that no other shares could be sold or transferred without the prior consent of SLU. That upset the other shareholders.

    And of course the other big concern is the fact that one of the largest worldwide mergers in the history of the beer industry is now pending and our local brewery through this SLU majority ownership is very much a part of that.

    As has been noted: does that presage consolidation in regional markets too with movement of brewing facilities and so on..thus unemployment and other economic problems.

    We will see!!!

  24. Bush Tea Avatar
    Bush Tea

    @ Walter
    I need answers to my questions,
    ++++++++++++++++++++++++++
    …then you need Stinkliar…..but
    That is YOUR business if you believe ANYTHING that he says….

    You can forget Fumble Froon.
    he like he need answers too….

  25. David Avatar
    David

    @Bushie

    Although there is merit in your cynicism???

    Sensible men (and women) must continue to probe for the ‘straw that broke the camel’s back’ moment.

  26. Walter Blackman Avatar
    Walter Blackman

    Justin Robinson October 3, 2015 at 7:38 AM #

    “IT system is complex, we are struggling with a major upgrade….. The new system is settling down……”

    Dr. Robinson,
    Many persons have told me that we put in a new system at the NIS a few years ago, and whilst putting in that system money flowed “like a burst pipe”. The actuary noted the relatively large capital outlay in one of his reports.

    In addition to that system, you have mentioned that the NIS is now “struggling with a major upgrade”. Finally, you stated that “the new system is settling down…”

    I am a little confused. Did the NIS purchase an original new system that now requires a major upgrade? On top of all that, did the NIS recently purchase a new system that is settling down?

    How much money has the NIS spent on IT over the last 15 years?

  27. Atrue Freeman Avatar
    Atrue Freeman

    de Ingrunt Word October 3, 2015 at 10:34 AM #

    I think you misunderstood me. My reasoning is that one explanation why Massy, not BHL, would have sold its 20% interest in BHL to SLU at $4 in 2015 would be if Massy itself had given SLU an option to purchase Massy’s interest in BHL as part of the deal to have SLU invest in BHL back in 2010.

  28. Walter Blackman Avatar
    Walter Blackman

    Justin Robinson October 3, 2015 at 7:38 AM #

    “Financials had fallen really far behind, more than a decade. The special project has resulted in the financial statements being brought up to 203/2014….. A special project is dealing with the backlog of short term claims.”

    Dr. Robinson,
    As I said before, this is not a personal attack on you and I commend and respect you for coming on BU and giving Barbadians a little insight into what is going on at the NIS. You are not a native Barbadian, but you have done more than the ministers of the Government of Barbados who were born and bred here. I hope the Lord gives you the wisdom, guidance, and strength to effectively tackle some of the problems before your tenure at the NIS comes to an end.

    Given your comments, and the insights they provided, how in God’s good name could we have Barbadian senators and government ministers unashamedly telling us that the NIS is well managed and the NIS fund is strong?

  29. David Avatar
    David

    @Atrue Freeman

    You are on the right track, something smells rotten with the deal. Keep on the scent.

    @Walter

    Minister Byer says what she is scripted to say.

  30. Walter Blackman Avatar
    Walter Blackman

    David October 3, 2015 at 11:04 AM #

    @Walter

    “Minister Byer says what she is scripted to say”

    David,
    Fair enough.

  31. de Ingrunt Word Avatar
    de Ingrunt Word

    @Atrue Freeman, ok that is a whole different ball of twine. I thought we were discussing BHL’s financials and their interface to SLU.

    What you are suggesting re Massy share sale to SLU and whether if “… Massy would have sold its 20% interest in BHL to SLU at $4 in 2015” because it “…had given SLU an option to purchase Massy’s interest in BHL as part of the deal to have SLU invest in BHL back in 2010” is thoughtful and insightful analysis/conjecture.

    And frankly it’s very likely that indeed it went down exactly like that.

    To all intents and purposes that type of ‘nod and wink’ is not illegal or even unethical as long as its basically transparent and does not contravene any insider trading rules and regulations.

    In simple terms (based on what you have said above) the option to buy the shares could have been a legitimate part of the loan from SLU; basically a straight up/ standard condition of the agreement.

    But I gather that you are extremely concerned that a lot of this deal has been ‘underhand’ and fraught with insidious ‘insider’ mis-behaviour. I have absolutely no idea of the validity of that, of course, but you may be very much on the right track as David alluded to.

    What I do know as a fact however is that the gargantuan Anheuser-Busch InBev beer group sells mucho beer brands worldwide through its various companies. And
    I know that they were well along the path of acquiring some other major world beer brand back in 2015 (now sights set on SABMiller owners of Miller & Coors Beer in US).

    Soooo, its absolutely logical for their subsidiary SLU to take that BHL option as the parent company was intent on consolidating their awesome power worldwide brand by brand, region by region.

    The larger proposed InBev/SABMiller merger provides a giant foot print in the Americas (north and south), Canada, UK, Europe, South Africa and greater Africa, Australia and Asia and of course right here in our little Caribbean region.

    With consolidation generally comes cost rationalization. Corporate speak for job lost; so again you are on another important track, it seems.

  32. de Ingrunt Word Avatar
    de Ingrunt Word

    Correction: “…some other major world beer brands back in 2010” and NOT “…brand back in 2015” that should read!

  33. Atrue Freeman Avatar
    Atrue Freeman

    I would still like to see Goddard Enterprises, with its interest in production, show an interest in BHL with a share for share offer. Two other BSE companies with a book value, and very likely a current value, way in excess of the current trading price are Pine Hill and Barbados Farms.

  34. David Avatar
    David

    RBC Caribbean declares $735m loss

  35. Due Diligence Avatar
    Due Diligence

    http://www.nationnews.com/nationnews/news/72724/hoyos-file-latin-capital-fund-purchase-triggers-banks-takeover-bid

    THE HOYOS FILE: Latin Capital Fund purchase triggers Banks’ takeover bid
    Pat Hoyos, pathoyos@gmail.com
    Added 03 October 2015

    IF YOU HAVE SHARES in Banks Holdings Limited (BHL) you should be getting a letter fairly soon, offering you $4 for each one of them.

    Considering that if you had put them on the market just a week ago you wouldn’t have got more than $2.50 per share, this does not strike me as a bad offer.

    ……………….

  36. Atrue Freeman Avatar
    Atrue Freeman

    Pat Hoyos, the offer should be compared to the value of the company, not the trading price on the BSE. It is well known that the fair value of a thinly traded stock is not generally reflected in the trading price.

  37. Justin Robinson Avatar
    Justin Robinson

    The main issue I am trying to raise is about a culture of share ownership and trading that appears to leave shares systematically undervalued. If investors simply buy and hold, there are so few trades that the market price rarely reflects the underlying value. The only investors that seem to benefit in such an environment are those who own a large enough block of shares to find the dividend income income, those who acquired these shares very cheaply and those who can afford to wait for the takeover bid if or when it comes.

    Small investors only benefit from share price appreciation when there is a takeover, which happens at lengthy intervals.

  38. Justin Robinson Avatar
    Justin Robinson

    If AmBev succeeds does that mean we will have to become a rum and pepsi nation?

  39. David Avatar
    David

    Jamaica is a good case study of what could happen in Barbados, Banks beer will remain in market but SLU will invest in our markets by pushing their other products.

  40. Atrue Freeman Avatar
    Atrue Freeman

    Shareholders must appreciate the power of “no” if they are to realize the full value of their investments – saying yes to the first offer will almost never result in the best deal. To really win, they need to risk losing. BHL has traded as high as $4.90 since January 2008 and possibly higher prior to 2008, so small shareholders had many opportunities to sell above $4 in the past – there is no need to hastily accept $4 now.

  41. Atrue Freeman Avatar
    Atrue Freeman

    David October 3, 2015 at 8:12 PM #

    So BHL may be more valuable to SLU (increased cash flows from other products) than it is to the current shareholders, meaning that SLU may be willing to pay more than the value to the current shareholders. This is more reason to reject the first offer.

  42. de Ingrunt Word Avatar
    de Ingrunt Word

    @David, your remarks sound perfectly accurate when you say that “Jamaica is a good case study of what could happen in Barbados, Banks beer will remain in market but SLU will invest in our markets by pushing their other products.”

    In life it’s always been to the victor goes the spoils.

    By the way I would add that through out the last 50 years of this nation’s existence there has NEVER been a single period when the citizens of one island have not tried to impress their will and might over the citizens of other islands.

    We saw it with the failed Federation, we saw it with the WI cricket team. It permeates every aspect of regional life.

    Inter-island brand domination/suppression has resulted in the past with absolute removal of products from shelves; imposition of onerous import taxes and so on. There is a long and tortured history throughout the region on this front.

    The fact that more of us are discussing those issues with deep concern and analysis is due almost entirely to social media’s prevalence.

    What you may also be aware of is that behind the scenes re the other big money areas in the software development and transaction business (for example the payment platforms like SurePays or Cell phone top-up, rewards programs and so) Barbados is very much a key player in the game but again there is serious regional consolidation to gain market economies and scale.

    And again the bigger boys in Jam and T&T seem to have the ‘upper hand’.

  43. millertheanunnaki Avatar
    millertheanunnaki

    @ Justin Robinson October 3, 2015 at 8:00 PM
    “The main issue I am trying to raise is about a culture of share ownership and trading that appears to leave shares systematically undervalued. If investors simply buy and hold, there are so few trades that the market price rarely reflects the underlying value. The only investors that seem to benefit in such an environment are those who own a large enough block of shares to find the dividend income income, those who acquired these shares very cheaply and those who can afford to wait for the takeover bid if or when it comes.”

    So JR, do you think the disposal by the NIS of its ‘significantly large’ holdings in the Barbados Light & Power was a wise long-term decision?

  44. Atrue Freeman Avatar
    Atrue Freeman

    http://www.nationnews.com/nationnews/news/72974/regional-company-eyes-banks-holdings

  45. Justin Robinson Avatar
    Justin Robinson

    BL&P was stuck at $11.75 with a tiny dividend that had not changed for years. The offer of $25 posed a real challenge. It was not the best price given the true value of the company, but far closer to it than the $11.75. It would have taken over 20 years of dividends to catch up to the emera offer price. We decided to sell some of our holdings and extract some of the value of the investment while still holding a significant shareholding for the long term. What would you have done

  46. Bush Tea Avatar
    Bush Tea

    That response is not logical Dr Robinson.

    Once Emera had purchased the block of 35% shares at $25 that belonged to the American company, that trade effectively revalued the price. The subsequent sale by Government (and others) did not ‘extract’ any additional value, It merely converted those now high-valued shares into cash (FOREX for government) which Stinkliar then handed over to the jokers who made a mess of Four Seasons.

    The transaction therefore converted gilt edge assets into shiite.

    Those 18% shares not sold to EMERA not only realised the increased value of the shares, but continue to represent a solid investment.

    WHAT WOULD BUSHIE HAVE DONE?
    Offered to buy any and all Barbadian-owned shares available, at the price offered by EMERA.

    Of course EMERA has held on to this local shares scam with L&P Holdings, and kept those shares artificially at that new level even though Holdings is now a full EMERA subsidiary, and even though EMERA shares are trading MUCH higher…. That way, the 18% are given minimal dividends, while the BOARD (EMERA) is free to do as it wishes with the retained earnings that rightfully should be shared with all shareholders – including the 18%.

    The question, Dr Robinson, is WHO has the responsibility in Barbados to ensure that such corporate deceit is identified and corrected?

  47. David Avatar
    David

    @Bushie

    The question you need to ask first is if the government was paid USD or Barbados dollars. Maybe the transaction between EMERA and bank was in US or Can but how were Bajans paid.

  48. ac Avatar
    ac

    Oh my GOD Phew ! bush tea you are running out of toilet paper !

  49. David Avatar
    David

    @Bushie

    In theory what you would have done satisfies on objective but from a practical standpoint how would it have been executed within the boundary of BSE rules?

  50. Atrue Freeman Avatar
    Atrue Freeman

    Prior to Emera’s initial investment, the NIS could have lobbied other shareholders to encourage the directors to increase the dividend. After Emera’s initial investment, it was unlikely that Emera would settle for a non-controlling interest. NIS could have lobbied other shareholders to reject Emera’s offer and wait for a better offer from Emera or other investor, especially after seeing the valuation. The worst case was NIS having to retain its LPH investment.

The blogmaster invites you to join the discussion.

Trending

Discover more from Barbados Underground

Subscribe now to keep reading and get access to the full archive.

Continue reading