Thursday 28th February, 2008


N&M head on the battle for BS&T: A long, frustrating process

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Bernard Dulal-Whiteway, chief executive officer, Neal & Massy Holdings Ltd.

“Money that is tied up

in a very short period of time, you don’t know when you’d be able to use it. You can’t tell the bank ‘I want this money on 30-day call or

60-day call.’ “It must have cost us about US$15,000 to US$16,000

a day in interest.”


[email protected]

Now that Neal & Massy (N&M) Holdings Ltd has been given the all clear to acquire the much sought after Bajan conglomerate Barbados Shipping & Trading Ltd (BS&T), there will be no name change for the new entity.

“There’s not going to be a name change again,” said N&M chief executive officer Bernard Dulal-Whiteway.

“We do not envisage at this point in time to take into N&M the BS&T name. That decision was made from the time we went into the takeover.”

He spoke in an interview on Monday at his office on Park Street, Port-of-Spain.

“Now that it’s been an acquisition—an acquisition I would say which was hostile to some extent—it’s been a situation also where we think we’ve paid a very good price.”

He also made it clear that N&M has no intention of subsuming the BS&T brand, which he said was iconic in Barbados, into the N&M name.

“BS&T is much better known in Barbados, so that we’d want to make sure the BS&T Barbados name continues because it’s such a significant player,” Dulal-Whiteway said.

Among BS&T’s top brands: Almond Beach Village, Supercentre, United Insurance.

“It (BS&T) is part of the corporate DNA of Barbados,” Dulal-Whiteway said.

The acquisition of BS&T will add several new business lines to the activities of the N&M Group: hotels (Almond), beer brewing (Banks Holdings) and insurance (United Insurance, which contributes about 40 per cent to BS&T’s profits.)

“There are some businesses that are similar and one would hope that by bringing them closer together in terms of purchasing, logistics, information technology systems, that we would be able to get certain synergies going.”

The Pierhead project

Dulal-Whiteway described the development of about 20 acres of land on Bridgetown’s south coast as very exciting and grandiose involving the Barbados government and the private sector.

It is to include hotels, shopping, entertainment and a marina.

The former Owen Arthur government had indicated that it wanted to play a leading role in the project beyond developing a marina, that involved ownership.

“It may mean they will have to compulsorily acquire what we own,” Dulal-Whiteway said.

N&M officials have not yet met with Barbados’ new Prime Minister David Thompson.

Long and frustrating

What started off as a merger—with N&M last year having 23 per cent of BS&T shares—turned into an acquisition.

“We feel that enough information wasn’t given to shareholders and there were some injunctions filed, and while that could have been resolved in our favour, we were then faced with an unsolicited bid by (ANSA) McAL for BS&T.”

N&M had no choice but to respond.

“Initially, what McAL came in with, a bid of Bds$7, was not good enough for us to accept because we always had 23 per cent and if McAL had come with an offer that we found was very attractive, one of the positions that we could have had was to withdraw and sell our shares to McAL.

But McAL came in at Bds$7 and we had to respond and we responded at a low figure because we were always of the opinion that what we were trying to do was to create a merged entity.”

N&M did not initially want to put cash on the table.

The offers, counter-offers and issues related to the legal and regulatory struggle, cost N&M US$2 million-plus. N&M also lost out on daily interest earnings on US$110 million it had deposited with the Barbados National Bank (BNB).

“From the time we said our offer had closed and had got the percentage we had, once we had passed 51 per cent, our offer was unconditionally accepted by us.

“As part of it, we had to deposit the funds with our brokers.

“Money that is tied up in a very short period of time, you don’t know when you’d be able to use it. You can’t tell the bank ‘I want this money on 30-day call or 60-day call.’

“It must have cost us about US$15,000 to US$16,000 a day in interest.”

BSC removes its cease trade order

Dulal-Whiteway explained that the people who have BS&T shares will have to get N&M shares in exchange.

“If you had shares, you had a choice: you could take up to 50 per cent in cash at Bds$8.50; the other 50 per cent you get it in N&M shares at 2.75 BS&T shares for one N&M, plus Bds$1.80 for every BS&T share you have.

“If you are a shareholder with 100 shares, the you’d get Bds$8.50 for. The other 50, you divide by 2.75, and you get that number in N&M shares, and then you’d get Bds$1.80 for every one of that 50.”

Of the shares N&M bought in Trinidad at $28.37 or Bds$9, Dulal-Whiteway said the Barbados Securities Commission (BSC) now says it must make that offer to everyone.


From merger to acquisition

N&M argues otherwise.

“At the end of the day, as part of this whole settlement of everything, what we have agreed is that when you are doing a transaction like this and you are exchanging shares and so on, you do not take the price of the share on the market.

“The Barbadians are saying, well, look, this value is $48, which is N&M shares divided by 2.75, whatever that is equal to, and then add Bds$1.80.”

Dulal-Whiteway said the methodologies used in the valuation of companies have nothing to do with market price.

“Market price tends to be influenced by many things. You tend to use the relative or intrinsic values,” he said.

N&M is soon to appoint a valuer, likely to be KPMG International.

The appointment of a valuer is one of the conditions of the consent order granted by Justice Elneth Kentish in the Barbados Supreme Court on February 13.

Most of the local auditing firms have done work at some point for the conglomerate, hence the possible selection of KPMG.

“MPMG is fairly independent,” Dulal-Whiteway said.

What went wrong?

Dulal-Whiteway said one of the first things that went wrong was the BSC, as regulator, taking legal action before calling in the relevant parties to discuss its concerns.

“They just called us, asked what have we done. We explained what we did and the next thing we know, there was a court order freezing or stopping N&M from proceeding.”

He said it was always questionable as to whether the BSC ever had the power to do what it did.

“They changed the law, but like many things, there was a lacuna (gap) in the law, which basically says they had a conflict.

“The people who should have been able to do some of the things the BSC were doing was the stock exchange and not the Barbados Securities Commission.

“That was part of our defence, apart from other things.”

A call to resolve the issue

As the weeks and months dragged on, N&M chairman Arthur Lok Jack wrote to the BSC chairman asking for a chance to resolve the impasse outside of the courts.

“For example, the governor of the Central Bank Marion Williams was of the opinion that the whole financial market in Barbados was being affected. She felt Barbados was really becoming the laughing stock of the situation.

“Therefore, they asked Sir Henry Forde, a former attorney general, to try and see whether he could mediate.”

That was six weeks ago.

First, though, a court order had to be drafted as well as a press release and a joint statement between the BSC and N&M.

Regarding the latter, the BSC asked N&M to withdraw its statements that some of the BSC’s actions were illegal. N&M agreed.

Lessons learnt

The first lesson Dulal-Whiteway learnt from this experience was the need for countries in the region to harmonise the rules governing businesses.

“Once you are talking about capital markets, things keep changing all the time.”

“You have to have a very proactive legislative process...

“If you are thinking about wanting to be a serious player in the capital markets, you can’t say you want to be a financial centre or attract financial interests and then have outdated legislation and have legislation that is conflicting with other major jurisdictions.”

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