Michael Bernard, managing director of Carreras Limited. Ashford W Meikle, Business Reporter
Carreras Limited has offloaded its investments in local conglomerate, Lascelles deMercado, with the sale of some 740,000 shares, as the company presses ahead on plans to narrow its focus to core business.
A Financial Gleaner source indicated that the trade, which took place on Tuesday with a value of $176 million, was brokered by PanCaribbean Financial Services for one its institutional investors but, contacted by the Financial Gleaner, senior executives at PCFS and its subsidiary PanCaribbean Asset Management, which manages the Sigma suite of unit trusts, declined to comment on the transaction.
The United Kingdom-based British American Tobacco, the second largest listed tobacco company in the world, owns just over 50 per cent of Carreras stock ,with some 244.5 million shares.
Lascelles deMercado is the second largest stockholder, with more than 74.2 million units.
Analysts with whom Financial Gleaner spoke agreed that the sale indicated that the former conglomerate ?— which moved its cigarette-manufacturing operations from Jamaica to Trinidad some 16 months ago ?— was streamlining its business.
"It is just a strategic move for them; they seem to be moving to that direction where they are concentrating strictly on core business," said an analyst who declined to be identified.
"The question is, who would be better off with the cash - the company or the shareholders? They have a majority shareholder, British American, and it is BAT's decision if they feel they can do better with the cash than the local company. I think BAT is saying, 'sell all the shares you have and send the money to us, and distribute it [to shareholders] and operate on what you need'; so it makes sense."
General Manager of Prime Asset Managers, Rez Burchenson, also agrees.
"If you have been following Carreras they have been winding down their operations, getting rid of assets not related to their core business," he said in a telephone interview.
"Carreras doesn't need to be this huge company anymore - they are now a distribution company and, as distributors, they don't need all that capital, investments and overheads."
It's a point managing director of Carreras, Michael Bernard, alluded to this year at one of Mayberry Investment Limited's monthly investors forums.
"We will continue to generate our profit streams with the least amount of capital requirement and generate more profit with less capital expenditure [and] release the capital and profits to shareholders," he said.
For the better part of the 40-plus years that it has operated in Jamaica, Carreras' business has spanned agro-processing, packaging, the Coca-Cola dealership, tobacco andcoffee farming, cigarette manufacturing, printing, biscuit manufacturing, agro-processing, funds management, insurance services and hospitality services.
At turn of the century the company embarked on rationalisation programme, which coincided with BAT's merger with Rothmans Holdings - then majority shareholder in Carreras - in 1999.
In that year, it sold its biscuit company, Jambisco, to Caribbean Brands. The following year it ceased to manufacture tobacco, turning to contract farmers instead.
In 2001, Carreras began winding up its packaging and printing business, completing this process in 2003. A year later, in September 2004, it sold its insurance company, Twickenham Insurance to Lascelles deMercado for $1.8 billion.
In 2005, it sold its last major asset, the Sans Souci Hotel to Lee Issa's Couples Hotel for $1.2 billion.
By the end of that year the company wrapped up the cultivation of tobacco and manufacturing of cigarettes in Jamaica, moving the operations to Trinidad and Tobago.
Having voluntarily wound up the operations of the Cigarette Company of Jamaica two years ago, Carreras ?— as a leaner and more efficient outfit ?— moved its corporate offices from New Kingston to CCJ's former Twickenham Park, St Catherine location.
In fact, when the Twickenham location is sold - which is expected to bring in an additional $200 million - the company's transformation to a distribution and marketing company would have been completed.
Carreras is known for its generous dividend policy, paying out $4.1 billion to shareholders last year, and so far, for 2007, it has paid out almost $1 billion.
There is still a lot more value in the company should BAT decide to scale down Carreras' capital base.
Up to the end of its 2006 financial year, as at March 31, Carreras - which had net profit of $3 billion on revenue of $7 billion ?— had an asset base of $10.3 billion, with about $9.6 billion concentrated in cash and cash equivalents and resale agreements.
ashford.meikle@gleanerjm.com
