Liberty Global’s Subsidiary in Barbados Moves to Force Out Minority Shareholders

The following communication was emailed to Jean-Pierre Paelinck, President, Secretary General, World Federation of Investors by Atrue Freeman, a concerned Barbadian investor.

Jean-Pierre Paelinck, President, Secretary General, World Federation of Investors

Dear Mr. Paelinck

We acknowledge that this matter may be of little interest to you.  However, given the relatively young securities market in Barbados, we would appreciate it if you would provide us with the benefit of your opinion on the transaction outlined HERE – in particular, the acquisition by amalgamation on page 15 and the quality of the fairness opinion on page 52.

Thanks in advance for any input that you may provide.

52 thoughts on “Liberty Global’s Subsidiary in Barbados Moves to Force Out Minority Shareholders

  1. David

    There are a lots of things wrong, at several levels, from a brief review, 10 minutes only.

    For example, they have provided some financial ratios, but no benchmarks. These mean nothing without benchmarks.

    They have relied on the local stock exchange which has historically, by the nature of its operations, tended to undervalue stock and maintain static prices over long periods. It was never a real market in the first place.

    The company seems intent on doing something which would effectively increase share value. That information most likely is being withheld. In these circumstances we may need more information that supplied in this report. Need to have some idea as to what that is.

    Between you and me (we), neither Deloitte nor any other such firm is to be trusted in these matters. They are working and being paid by the company.

    And we could go on.

    We will try to give it a thoroughgoing to see what the story is, if we find the time.

    But it smells fishy!

  2. David

    What the company may be doing is what a number of firms in more developed market places have been doing for some time now.

    They seem willing to engage in a stock buy-back operation using cheap money, and as a result, effectively increase share price, dividend flows to a narrower shareholder base, etc

    North American firms have long been on a diet of zero or near-zero interests rates for a decade. Cheap money from the Fed. This may indeed be the capital being used to replace unwanted shareholders.

    In that case, the cost of capital (CoC) would be much less than the historical dividend payout. Or at least that could have been the determination of the firm.

    The people who always benefit from such a corporate maneuver are the management and a narrower ownership.

    The management can earn higher bonuses etc by showing higher returns to a narrower class of shareholders, frees up the decision making apparatus, even privatize a public company.

    If other corporate transactions are indeed contemplated these numbers could be much larger, of course.

    Has Barbados and Barbadian not sold some assets (BS&T) etc and found a gross undervaluation prior to this C&W deal?

  3. David

    We are not convinced that the World Federation of Investors will be very helpful.

    Concerned shareholders may need to fund they own study

    • @Pacha

      Agree with you. Unfortunately if minority shareholders when organized under Douglas Skeete failed to be an effective force can’t see it happening now.

  4. David

    Well. in the absence of insufficient reliable and independent info, and given the historical certainties, we would then advise NOT to sell in the short term.

    Is there no major investor, like the NIS, which may want to fund an independent study? Or have they already made side deals?

    • @Pacha

      It is good Atrue Freeman has raised this issue. What CW is trying to do with this transaction albeit within the law as Jeff opined, it is ethically wrong this we know.

  5. C&W is an organization that we grew up with. Indeed, it has been around for several lifetimes, it seems.

    We remember well the offices which were located in our neighborhood in Dover, their cricket team, etc. There was much social value attached thereto.

    C&W gave us Joel Garner, Llewellyn Tull, many more world class cricketers.

    And this is the kind of predatory initiatives we are to now face. All this history can only be subsumed into some legal way of ‘thieffing’.

    Well well!

    There will come a time when all artificial persons must be gotten rid of, as well as many not so fake.

  6. Pacha ‘The company seems intent on doing something which would effectively increase share value. That information most likely is being withheld.”

    Surely not. That would be insider trading, if anyone of the decision makers therein benefit from the action.

  7. Yes, Cursoe you are quite RIGHT, if your knowledge is to be limited to the ‘letter’ of the law. And that some how such a guidance can have a fundamental influence on insider behaviour.

    We would have to be idiots to believe that, and nothing but that.

    A few weeks ago we got a message indicating to us that Experian, the credit rating agency, has an ‘exposure’ of 143 million customers data, social security numbers and all.

    We were advised that two senior officials were dumping their shares before that info became public.

    Well, there are insiders and insiders. Make sense from that. And we promise you no one will ever to jail in this environment.

  8. Pacha,

    Your last sentence rings true in respect of insider trading. That said, can we just say that there are many in corporate environments who should not be anywhere near money?

    Legislation does not really cover lack of morals, albeit, the spirit of the law is greater than the form and therefore these sorts should easily be able to be brought to account.

    But then, as you note…political will, ‘political’ not being used as a narrow term there, but encompassing of the societal interactions, such as business and buddies etc. Not only in Barbados mind you.

  9. Crusoe

    Where were you?

    These people collapsed the entire financial system circa 2008. Not one single banker went to jail.

    In fact, trillions more were given them.

    Cursoe we welcome you to dwell in a fool’s paradise if you will, not us though.

  10. “which may want to fund an independent study”

    The challenge is in order to get an alternate fairness opinion, one needs access to C&W financial information. And a qualified valuer who is willing (doesn’t have conflict of interest) to do so. This will mean asking the court to delay the amalgamation date, and require C&W to deal with a valuation firm. Only then, will one know if there are grounds to pursue a higher share price.

    I suggest the CJ, based on the Annell bail hearing, he seems available to hear matters of urgency and public interest (NIS is a shareholder).

  11. Thanks NorthernO

    The real problem is that increased value is only going to be registered after the buy-back

    Obviously, C&W is not desirous of having small shareholders participate in those

    With the NIS as a holder of a large block traditionally they could have been expected to offer some cover for smaller holders of stock.

    But the NIS has been part and parcel of global attempts to privatize public assets

    Northern, can the court force small shareholder to sell as a condition precedent to the merger? Is this local law?

  12. can the court force small shareholder to sell as a condition precedent to the merger? Is this local law?

    The amalgamation circular in Appendix C deals with the rights, or lack thereof, of dissenting shareholders. I think this covers the general area of your question. (ie) not a court matter

  13. NorthernO

    Will look later. However, dissenting shareholders may well find themselves in a segregated class. A class not entitled to newly created value. They maybe designated as Class B or something.

  14. Taken from C&W Annual Reports by year. Do you see any correlation between dividends and share price? And even when profitability returned in 2015, the dividend did not. And appreciate, 80% of the dividend is internal. On this alone, there is a case for shareholder value suppression.

    The share price of $5.40 per share at March 31st 2011 is 50
    cents lower than the trading price at March 31st 2010. The
    Board is nevertheless pleased with the strong performance of the
    Company and a final dividend of 14.5 cents per share and a special
    dividend of 15.2 cents per share was declared. The Company also
    paid a half year dividend of 14.8 cents per share and a special
    dividend of 17.4 cents per share at the end of February 2011,
    bringing total dividend payments for the financial year to 61.9
    cents per share

    Despite the economic recession, the Company’s performance
    during the year is commendable. Profit before taxation at the
    end of March 2011 was $78.3m when compared to $66.4m at
    the end of the previous year. Total revenue of $372.4m was 1% lower than the previous year.

    Dividends & Share Price
    The Board has declared dividends totaling 44.5 cents for the period
    under review. Trading in shares has been slow during the year and
    our share price declined by 0.06 cents to $5.34 per share at the
    end of 31st March 2012

    Financial Performance
    The Company’s gross margin of US$142m remained relatively
    flat when compared to last year. Despite the impairment charge,
    the Company has maintained a level of profitability during a
    recessionary period.

    The Board declared a half year dividend of 14.8 cents per share but
    have made a decision not to declare a final dividend as the Company
    is about to embark on a major investment to expand its fibre network.
    The share price on the Barbados Stock Exchange was $5.00 at 31st
    March 2013.
    Financial Performance
    The challenges experienced during the year are evidenced in our
    financial performance. Revenues declined by 4%, profit before
    taxation declined by 77%, total operating expenses increased by 9%
    and our results were stifled by an increase in bad debts.
    During the period, additional competitors entered the
    telecommunications landscape and while we continued to be
    profitable, our revenues have been eroded by the use of Voice Over
    Internet Protocol (VoIP) technology and a general reduction in
    consumer spend.


    The Board has not declared an interim or
    final dividend for the year ended 31st
    March, 2014. Shareholders will appreciate
    that the long term viability is critical and
    the sacrifice being made now will redound
    to the benefit of all stakeholders in many
    years to come.

    Financial Performance
    As a result of the current economic
    environment, coupled with a strategic
    decision to restructure the business, LIME
    recorded a loss before taxation of $69.749m
    compared to a profit of $11.971m in the
    prior year. This loss stems largely from
    one off restructuring costs of $103.240m
    incurred during the year. It represents a
    significant investment in the future of this
    company that will enhance its long term
    competitiveness and ultimately deliver
    significant value-added. A good indication
    of this is that total operating expenditure
    fell by approximately $12m (or 5%).


    Due to the level of investment
    in the current year and planned
    investments required, and its
    desire to use internally generated
    cash flow to fund operations
    rather than incurring additional
    costs associated with external
    borrowing, the Board has decided
    not to declare a dividend for the
    year ended 31st March 2016.

    Overall, the Company reported
    a profit before taxation of
    $114.4 million. However, a more
    indicative measure of our financial
    performance is our Earnings Before
    Interest, Taxation, Depreciation
    and Amortisation (EBITDA) which
    increased by 9% over the previous
    year to $111.1 million.

  15. Is there any correlation between the timing of the cessation of dividends and the time of acquisition of Columbus Communications/Flow by the C&W parent company

  16. And were decisions made in C&W based upon the interests of the parent company in both Barbados operations, which may not make sense for those that have an interest in C&W and no interest in Columbus

  17. @Alien
    forget that.
    How can a company producing $111M in EBITA, given its assets/debt of C&W, be worth (142M shares at $2.86) $405M. This is what D&T says is “fair” in its opinion. The average EV:EBITA is 15, for C&W it is 4. Even at $5/share it moves to 6.3.
    After asking shareholders to forego a dividend, so they could fund investments internally…”Shareholders will appreciate that the long term viability is critical and the sacrifice being made now will redound to the benefit of all stakeholders in many years to come.” The very least they could have done was to pay an extraordinary dividend to compensate for the dividends foregone, now the firm has yielded massively improved earnings.
    What you call this is “legal rape”.

  18. NorthernObserver September 27, 2017 at 11:46 AM #

    I agree – my bet was $6.30.

    “Alien August 27, 2017 at 7:39 PM #
    For the NIS, 3,118,047 shares at $2.86 would be $8.9 million, but 3,118,047 shares at a more realistic valuation of $6.30 would be $19.6 million. Add to this the future income generated by $8.9 million versus $19.6 million.”

  19. NorthernO

    The EBITDA consideration is central. This primary valuation metric should be some number of times EBITDA, depending on industrial sector. It’s a solid rule of thumb.

    Your thinking on these matters is worthy of acceptance by us all.

  20. “NorthernObserver September 27, 2017 at 11:46 AM # – @Alien forget that.”

    But looking into these other matters would provide insight to if the company was being managed with only one shareholder in mind.

  21. What we need is for somebody in Bim with gumption to take this on. And there is money too. IF class actions are allowed, a legal beagle in combo with an accounting one, could easily seek a percentage of any increase between $2.86 and ?????. That is 26.8M shares times that cut, even 10 cents is nearly $3 million? C&W are happy to play hardball, but they sure as hell don’t want a public outcry, that is bad for business.

    @Pacha, you and BT like to remind the BU Bloggerati of the BMLAS. Well the chief protagonist there, is now part of the problem. He has joined the elite and is part of the cross directorships he so opposed 2 decades ago. Come-sing-a-song is still fighting, but he prefers more populist targets. Since Sagicor + NIS + other pension funds + 13M shares of unidentified holders exist, it does expand across a wide spectrum of the populace.

  22. Imagine that – I hope the NIS Sagicor CIBC and the other pension and mutual funds are quietly doing the same, because the alternative would suggest that the investors in those funds should be the ones seeking (legal) recourse.

  23. Northern

    We are willing to help however we can. But this is a sad state of affairs.

    As you would recall, we tried to get the unions to see that these issues of workers’ ownership of enterprises were the new frontier – 30 years ago!

    But instead of dealing with them as such the union leaderships and others preferred to pursue different interests.

    People like Leroy Trotman was more interested in trying to convince the very corporate elites that he could replace Sandiford as PM during the problems faced in the early 1990s.

    The unions, more generally, were more satisfied with harrying employers for 2 or 3 percent wage increases than owning the whole dam thing for their workers.

    Then they had the temerity to engage in the highly destructive social partnership. Giving up workers’ right for no stake in enterprises.

    We had suggested that the largest enterprise in Barbados, the then BLMAS, now Sagicor, could have been taken over by the unions.

    That it was already owned by workers but controlled by the same corporatists Trotman and others were bowing down to.

    We offered the unions to bring their superior organizational skills, resources and political clout to bear on the economic democracy discourses of the late eighties and early nineties. That the Association of Concerned Policyholders was willing to totally give way to them.

    On the credit union side we were trying to force a more active role in the economy, for the acquisition of state enterprises that Sandiford was being forced to sell off.

    That is a brief description.

    The present landscape has markedly changed. Historic opportunities, never to come again, have been missed. Workers are still running ’bout behind employers begging for farcical wage increases.

    Trotman got his knighthood, ‘beammer’ maybe a fanciful retirement and the likes. He controlled workers for corporate and government interests through the Social Partnership. When ownership of the economy by workers and their organizations would have meant control of government and the commanding heights. Everything the corporatists now have.

    On our side, another man seems to have had the same kinds of intentions. Hilary Beckles too, got a knighthood, drove a ‘beammer’ and more importantly ended up on the same corporate boards serving the interests of the very elites we were supposed to be fighting against for social and economic justice for ordinary people.

    People who may not have a lot of investable capital, but owned an insurance policy, have a few shares in a public company or have their pension invested in such companies.

    This was not supposed to benefit any of us, personally. It was supposed to be about service to country, that’s all.

    In the case of BMLAS, that organization could have been taken over without a damn red cent – the workers already owned it but the White corporate elites and their friends controlled.

    And the same thing that C&W is doing now happened to all the policyholder – workers with policies in the now Sagicor, as a mutual company then. Today this asset is now in other peoples’ hands. We own nothing there!

    Northern, our country should not have to relive these experiences with C&W. And that the same cast of opportunistic characters, the likes of Hilary Beckles in particular, keep presenting suggest that a guillotine maybe a more appropriate device than a pressure group of small shareholders.

    However, we are willing to help in any way possible.

  24. @Pacha,

    The current frontier and potential for socioeconomic change, with their own pension funds etc, are the credit unions.

    Not so new, but the potential that they have can create new opportunities and alternatives for tired investors and workers’ ownerships.

    Imagine if the credit unions’ pension funds bought out successful, family run and viable business in Barbados and other parts of the Caribbean?

  25. I agree that credit unions have a lot of potential, but first need to address the issue of real versus perceived ownership of the equity and balance the risks taken on behalf of and the rewards available to members. And, yes, I have heard about cooperative principles and so on, but those providing financing have to be adequately recognised as well.

  26. @ Pachamama September 27, 2017 at 5:22 AM
    “Well. in the absence of insufficient reliable and independent info, and given the historical certainties, we would then advise NOT to sell in the short term.
    Is there no major investor, like the NIS, which may want to fund an independent study? Or have they already made side deals?”

    As long as an injection of foreign exchange is involved to shore up the fast dwindling reserves the current administration would figuratively sell its philosophical mother and disown its founding father(s) to save its sorry ass over the next 6 months in order to delay devaluation of the Mickey mouse dollar while trying to buy votes through pandering to the ‘importing’ demands of the materialistically-drunk pseudo middleclass.

    If the NIS could offload the constant dividend-paying BL&P shareholdings, why not C&W’s whose business in the Eastern Caribbean can be sold to any investor john looking for tax write-offs while playing the business game of Chinese checkers without the ‘already bought’ regulators ever blinking an eye of concern.

    • @Pacha

      As an observer of blockchain technology you have noted the news today that RBC is using the technology for US/Canada payments?

  27. “Minority shareholders meeting this afternoon for legal guidance according to Douglas Skeete.”…..does this refer to C&W?

  28. Yes, minority shareholders of C&W. I believe at 5pm or 5.30pm, at the public workers credit union. Douglas Skeete was talking to David Ellis this morning, so either of them can confirm the exact details.

  29. @Alien…thanks, unfortunately I am several thousand km’s away.

    I appreciate your writings. “This was not supposed to benefit any of us, personally.” Of course this is the challenge.

    I am sure we have common ground in several areas, and divergent opinions in others. I confuse some of my closest friends, who are of the opinion that my consistent support of universal healthcare means “I am a socialist”. Conversely, many of the more liberal minded ones, think my support of certain financial thrift makes me a “raging right wing nut”.

    Ultimately I do not understand all the terms which end in “ist” or “ism”. For me, it is straightforward, it is based on a moral compass, the exact positioning of which does not regularly fit many definitions.

    Here with C&W, what they are attempting to do is highway robbery. They know it, I know it, and you know it.

  30. @miller
    “to delay devaluation of the Mickey mouse dollar while trying to buy votes through pandering to the ‘importing’ demands of the materialistically-drunk pseudo middleclass.”

    You have a way of expressing yourself, which usually brings a smile. A skill of which I am very jealous.

  31. David, I am beginning to come around to your view that news provided to us may be influenced by factors other than newsworthiness. I just listened to the VOB news – Charles Herbert and Justin Robinson received extensive coverage on the S&P rating adjustment, but no mention of Douglas Skeete’s comments regarding C&W and no question to Justin Robinson regarding NIS’ response to C&W.

  32. Alien you make me laff.
    The average Bajan hasn’t a clue, nor gives a shit, about C&W beyond when they raise rates on products they use. They really don’t care about credit ratings either, other than it usually morphs into a political blame session, and hence worthy of air wave chatter.

  33. That may be so, but have mercy – VOB spoke to Douglas Sheete this morning about the concerns of the minority shareholders and their intention to have a meeting to get legal guidance. At a minimum, news coverage of that development throughout the day could be reasonably expected.

    • @NorthernObserver

      You are correct but Alien has a point, the media has a mandate to deliver news to inform and educate. These guys just go with the flow.

  34. Garfield Sinclair, president of the Caribbean operations for Cable & Wireless Communications (CWC), is confidently talking about how the Barbados shareholders were manipulated out of Cable & Wireless Barbados.

    Barbados shareholders are said to have approved an offer from Liberty at the C&W Barbados annual meeting last month.

    “That is public knowledge. I was at the AGM where they were successful. They did it in a transaction where they set up another company and did the amalgamation,” said Sinclair, who is also a member of the C&WJ board.

  35. Once again our politicians, lawyers and senior civil servants are found wanting. Barbadians are badly treated because they are led by mice.
    Stop trying to patchwork a decaying system. We need a new companies act, with new reporting conditions and which expressly protect the rights of minority shareholders. The present thinking behind company legislation – such as the legal fiction that a company is a body corporate – needs urgent review.
    A company is inanimate and cannot make decisions; the people who make decisions are the directors and executives. Make them accountable for their actions. Make auditors accountable for their findings. Give all stakeholders representation on the board. The Germans do it and it has not held them back and a forward-looking economy. The present system was created in order to protect businesspeople from bankruptcy.
    The last time I made this point some dodo, who clearly does not understand the arguments, tried giving me a lesson in the legal status of a company. Fool.


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