Al Edwards, Business Co-ordinator
THE sale by Lascelles deMercado of its block of more than 200 million shares it held in Kingston Wharves to a group of shipping and pension fund managers has alerted the attention of the Financial Services Commission (FSC), Sunday Business understands.
The sale, traded off the exchange which amounted to over $270 million or $1.35 per share, was sold at a discount of 30 cents per share which was below the price of Kingston Wharves shares traded on the Jamaica Stock Exchange.
When Sunday Business ventured to make inquires as to just how far the FSC had got with its inquiries and when a decision of sorts would be announced, a spokesperson said "This particular matter can only be dealt with by Brian Wynter and he is off the island presently."
Seeking to explain Lascelles deMercado's decision, the group Managing Director William McConnell speaking to the Financial Gleaner last month said "We didn't want to fragment the block. It's a big block of shares and quite often when you are selling blocks of shares of this size you have to take a discount to get it sold."
Earlier this year, Grace, Kennedy & Company, holders of a 40 per cent stake in Kingston Wharves was mandated to offer for sale its pension fund's 11.78 stake in the Wharves which amounted to 126 million shares.
The JSE's rules governing take-overs and mergers provide for persons "acting in concert who acquire 50 per cent or more of the voting rights of a company or control of the company ,to make a mandatory offer to all shareholders.
The JSE gave Grace, Kennedy & Company and Grace's Pension Fund the opportunity to rebut the presumption that both parties were acting in concert.
It further stipulated that those shares must be sold through the facilities of the JSE to an unrelated party (or parties).
The decision was taken to sell the Grace Pension Fund shares to the Shipping Association of Jamaica and Kingston Workers Association superannuation fund with Edward Gayle acting as the purchasing broker.
It comes as no surprise that Grace's senior management would be miffed at Lascelles' over the counter sale particularly after having to comply with JSE stipulations.
Grace's chief financial officer, Don Wehby, commenting on the sale of the stocks over the counter rather than on the JSE, said based on the sale price it would have attracted more than $20 million in transfer tax and stamp duties.
"Someone had to spend millions of dollars more to deal with the transaction this way and you have to ask why," he added.
Bigger stake
Sale of shares traded off the exchange attract transfer tax of 7.5 per cent as well as stamp duty, whereas those sold on the Stock Exchange attract a total levy of less than two per cent and are not subject to transfer tax.
Lascelles' 200 million shares were sold to Transocean Shipping, the Jamaica Producers Group Pension Fund, Kingston Port Workers Superannuation Fund, Shipping Association of Jamaica, Lanaman & Morris, Jamaica Freight & Shipping Pension Fund, and Maritime & Transport.
It would seem to appear that the pension fund groups are seeking to acquire a bigger stake in Kingston Wharves and are going about it in an unconventional manner and raises the question whether they are all acting in concert.
The sale traded off the exchange exposes itself to accusations that this amounted to a manipulation of the market in Kingston Wharves shares by one or more of the parties connected to the transaction, with a view to acquiring the shares at a price below market price and, by acting in concert, to obtain or to consolidate ownership of the shares in Kingston Wharves with a view to acquiring a controlling interest in Kingston Wharves.
A little background on the respective players and their institutions reveals an interlocking connection.
The Shipping Association of Jamaica (SAJ) is an association of companies engaged in the businesses of stevedoring, ships agents and port operators.
Each member has one vote in relation to the appointment of the management committee which comprises Grantley Stephenson, Harry Maragh, Robert Kinlocke, Paula Pinnock, Roger Hinds, Michael Bernard, Hylton Clarke, Donovan Martin and Alister Cooke.
As the employer of port workers the SAJ Managing Committee is entitled to appoint the majority of trustees of the Kingston Portworkers Superannuation Fund which is chaired by Charles Johnston.
Shipping lines coming to the Port of Kingston use Kingston Wharves which operates berths one to nine and APM Terminals (Jamaica) which operates berths 10 to 11 and Gordon Cay.
APM is a combination of overseas and local ownership including Charles Johnston, Hylton Clarke and Roger Hinds.
APM manages its own stevedoring operations and Kingston Wharves has served notice of its intention to terminate the existing stevedoring arrangement which has resulted in litigation between Transocean Shipping, A.E. Parnell & Co.Ltd., Jamaica Fruit and Shipping Company on the one hand, and Kingston Wharves on the other.
Grantley Stephenson is connected with the Jamaica Freight and Shipping Pension Fund by virtue of being a managing director of Seaboard Jamaica Ltd., which is an associated company of the Jamaica Fruit and Shipping Group.
Mr. Stephenson is also president of the SAJ, as well as the chairman of the management committee of the SAJ.
Roger Hinds is the owner of Transocean Shipping and Hylton Clarke is the owner of Maritime and Transport Ltd.(also owner of A.E.Parnell & Co.Ltd.), and Michael Bernard of Shipping Services Ltd. are also members of the managing committee of the SAJ.
Charles Johnston also owns Shipping Services Stevedoring which is a member of the Jamaica Fruit and Shipping Group.
Harry Maragh who is the owner of Lannaman and Morris, is vice- president of the SAJ and, along with Hylton Clarke and Grantley Stephenson among others, are trustee members of the Kingston Portworkers' Superannuation Fund, which is chaired by Charles Johnston, who is executive chairman of the Jamaica Fruit and Shipping Group.
Mr. Johnston is also the chairman of the Investment Committee of the Kingston Portworkers Superannuation Fund, on which Grantley Stephenson also sits.
When pension funds and bodies like the SAJ make investments they are generally advised not to concentrate risk but rather spread them.
At this point in time, many of these bodies appear to be looking to acquiring a larger interest in Kingston Wharves.
The House Committee-Legal Sub-Committee on Mandatory Provident Fund System in the United Kingdom in outlining the duties of trustees stipulates under the heading "duty of diversification: "Trustees have a duty to diversify investments of scheme assets so as to minimise the risk of large losses, unless under the prevailing circumstances it is clearly prudent not to do so. The extent of this duty is also a question of fact: Has the trustee diversified the scheme's investments to a reasonable extent given the size of its investments, the economic market conditions, the type of investments made, the geographic dispersion of its investments, the investment distribution by industry/sector and the purposes of the scheme."
These are pertinent questions for the various bodies that now hold a small stake in Kingston Wharves but whose trustees are looking to increase their holding.
Last Tuesday, the SAJ management committee chaired by Mr. Stephenson voted and won a proxy to vote on the matter of electing new directors of Kingston Wharves at an emergency extraordinary general meeting. A proposal to do the same thing will be put before the Kingston Portworkers Super-annuation Fund tomorrow.
What has not been made clear is why is the proxy necessary and just who will be given the proxy allowing that person to vote and which directors will they be voting for and against.
KGN WHARVES MINORITY SHARE STRUCTURE
Organisation Stock units % Value ($J)
Lascelles deMercado 8.50
Kingston Portworkers Superannuation 179,327,556 16.74 358,655,112
Shipping Association of Jamaica 170,528,162 15.92 341,056,324
Shipping Assoc. Staff Pen. Fund 2,566,666 0.24 5,133,332
Jamaica Producers Group Pension 2,000,000 0.19 4,000,000
Jamaica Fruit & Ship. Co. Ltd. 68,656,184 6.41 137,312,368
Maritime and Transport Ltd 8,647,553 0.81 17,295,106
Lannaman & Morris Shipping 2,500,000 0.23 5,000,000
A.E. Parnell 4,277,776 0.40 8,555,552
Harry Maragh 3,835,4071 0.36 7,670,814
Jamaica Producers Group Ltd 6,623,725 0.62 13,247,450
Total interest 50.41
