Lavern Clarke, Business Editor

Douglas Orane, chairman and CEO of GraceKennedy Limited has expanded into Europe. - File

Jamaican companies were active in the merger/ acquisition market in the past year, in the search for growth and new markets at home and overseas, led on a timeline by GraceKennedy Limited.

The acquisition gave the conglomerate a manufacturing presence in Europe to deepen its status as a multinational.

But, blue chip GraceKennedy as well as Lascelles deMercado and Company, two of the most profitable local companies, also announced deals to sell a portion of their holdings - all linked to plans to expand through leveraged partnerships.

GK LEADS THE WAY

Two months into the year, the Douglas Orane-led GraceKennedy announced a £23 million (J$3.1 billion) acquisition of UK-based WT Foods from Bridgeport Capital Limited, taking the market by surprise, but acquiring in the process several new brands of ethnic foods that are manufactured and distributed in the United Kingdom.

Nine months later the conglomerate would sell off a portion of its remittance business to Western Union for US$29 million (J$2.2 billion) to secure a partnership with the money transfer multinational.

The WT Foods purchase, which represented GraceKennedy's first European acquisition, was expected to add some £60 million to the company's group revenues.

Nine months into GraceKennedy's financial year, to September 30, the conglomerate was clearly on track to a new record turnover, with revenues topping $35.4 billion - annual revenues were $36 billion for the 12 months of 2006 - some of which was attributed to increased distribution of WT Food's Nurishment and Encona brands.

But, not so clear was whether profits would also shoot to new peaks in line with Orane's top of the year projections.

The performance of the company's stock in November and December, however - GK climbed to a 52-week high of $73.85 mid-December - suggested the market was anticipating that the conglomerate would continue to perform to expectations by outperforming itself.

GraceKennedy also made two other purchases in the Caribbean: 30 per cent of Barbadian insurance company Trident for US$1 million (J$67.8 million) in March, and 90 per cent of One1 Financial, a nascent Trinidadian deal broker, for about J$170 million in July - both small in comparison to WT Foods.

The deals were a follow-through on early signals from the conglomerate that it planned to grow through acquisitions.

The conglomerate also sewed up another 10-year contract with Western Union as its Caribbean agent, but to take that prize and to secure a partnership with the American money transfer giant on its other regional forays, likely in the area of micro financing, GraceKennedy gave up 25 per cent of its regional remittance business, GK Money Services Caribbean (GKMS Caribbean), to Western Union in November, which paid US$29 million (J$2.1 billion) for the equity stake.

AIR JAMAICA'S PACT WITH VIRGIN

In May, Air Jamaica followed through on plans to divest its London route, selling its slots at Heathrow to Sir Richard Branson's Virgin Atlantic airline for £5.1 million (US$10 million). The deal was consummated at the end of October, but only after Branson had met with the new Bruce Golding administration to soothe away concerns that the country's travel and tourism sector would not be worse off under the arrangement.

A side deal would later emerge, with the two airlines expanding their code-share pact to the Miami route, offering European visitors to Jamaica another transit point to the island.

The London route had been the national carrier's biggest loss-maker, haemorrhaging US$25 million to US$27 million on an annual basis.

Branson would later switch the gateway from Heathrow to Gatwick, saying it would be more economical to operate out of the latter.

The airline billionaire said he invested US$200 million in the new service, including a new airplane, which began flights at the end of October.

PETROJAM GIVES UP 49%

The Bruce Golding said it would go ahead with plans to sell 49 per cent of monopoly oil refinery, Petrojam Limited, signed off on a deal mid-year to sell 49 per cent to PetroCaribe partner Venezuela.

Venezuela's share of the refinery for which it is paying US$63.7 million, will be held by PDVSA. PDVSA is expected to share in the cost associated with the Petrojam's expansion to a refining capacity of 50,000 barrels of oil per day, and engineered to handle heavier, but cheaper crudes.

The cost of the expansion programme is projected above US$500 million.

JPS SOLD AGAIN

In July, Japanese multinational, Marubeni Corporation, bought out Mirant Corporation's Caribbean holdings, paying US$1.082 billion, inclusive of debt and other financial obligations, for equity stakes in four utilities.

Jamaica Public Service Company was the most expensive acquisition in that deal, but while Marubeni was said to have paid US$800 million to secure 80 per cent of the power company, Mirant ended up with a net US$352 million, with the rest used to clear debts.

Still, the deal gave Mirant a US$150 premium on the US$201 million it paid for JPS in 2001, and gave Marubeni 55.4 per cent equity interest in Grand Bahama Public Company, Bahamas; a 39 per cent stake in PowerGen, an independent power producer that supplies 80 per cent of the total electricity demand in Trinidad & Tobago; 25.5 per cent of Curacao Utilities Company; and 80 per cent control of JPS.

The Jamaican government, which had planned to divest its 20 per cent in JPS, prior to Mirant's announcement of the sale, has now opted to retain its minority position in the utility.

A MERGER BECOMES A FACE-OFF

In May, Trinidad's Neal and Massy Holdings Limited and Barbados Shipping and Trading Company Limited struck a deal that was to have resulted in their merger into the largest Caribbean conglomerate with combined revenues of US$1 billion.

The two companies had signed off on the deal and everything was in place for a swap of BS&T shares for NMH's. All that remained was shareholder approval of both listed companies, and the bans for the marriage were suitably publicised in anticipation.

The new entity said Neal and Massy Chief Executive Bernard Dulal-Whiteway was to be called Neal & Massy BS&T Group Limited after their amalgamation.

"Both Neal & Massy and BS&T have enjoyed a very good relation over the last 10 years, so much so that both of us invested in each other," he said.

But the deal's consummation would be blocked by Trinidad's ANSA McAL Group, which in July threw the deal off track with its announcement of a B$7 per share or B$263.5 million offer, sparking first the derailment of the merger and then leading to an all-out bid war for the shipping conglomerate.

To effect the takeover, ANSA created a new company AMCL Holdings Limited, registered in Barbados.

The new offer sparked the interest of BS&T shareholders, who to then had seemed prepared to endorse the NMH/BS&T merger, and their anticipation grew as ANSA sweetened its bid to B$7.50 per share.

The BS&T's management's public promotion of the NMH deal over ANSA's hostile bid changed nothing, and Neal and Massy would eventually cave and announce alongside the BS&T board that the merger was off.

But the Trinidad conglomerate was not even close to defeat. Far from retreating, its board suited up and re-entered the battleground, prepared for war.

Even with the AMCL offer on the table, NMH snuck in acquisitions of 3.78 million more BS&T shares in October, paying TT$107.35 million or TT$28.35 per unit (approx. B$9.04 per unit) and increasing its stake in the shipping company from 23 per cent to 27.9 per cent or 21.17 million shares.

Its real counter, however, was to launch in August its own takeover bid to up the stakes in the increasingly hostile battle between the two Trinidad based operations.

But as the rivalry got red hot and the offer prices kept climbing - reaching B$8.50 for NMH and B$10 from AMCL to value BS&T on a per share basis at $640 million and $753 million - Neal and Massy chairman Arthur Lok Jack would make a master play. He publicly announced that his company had made its best offer at B$8.50 and could climb no further, and was therefore not averse to selling out to AMCL. Check.

That concession sparked a surprising statement from ANSA - that it was pulling its bid, with the claim that BS&T was cobbling an unrelated deal that could materially affect its value. It gave no details.

Within hours, Neal and Massy was back in play, announcing that its offer remained viable and would be proceeding with its takeover under revised terms. Checkmate.

That offer was duly made - either shareholders take a B$8.50 per share for up to half their shares tendered under the offer and swap the remainder for NMH shares at a ratio of 2.75 BS&T shares for one NMH share, plus cash of B$1.80 per BS&T share or swap all BS&T shares deposited at a ratio of 2.75 for one NMH share plus cash of B$1.80.

But, no sooner was it announced than in stepped the regulators to thicken the already involved plot.

The Barbados Securities Commission declared itself concerned by the actions of the rivals and petitioned the High Court to pronounce on whether their bids conformed to established takeover rules. The trading of BS&T shares were suspended in the interim, forcing NMH to extend its offer invitation twice.

The BSC at one point was also seeking to have Neal and Massy improve its offer in line with the price it paid to acquire the 3.78 million shares in October.

Eventually, the trading suspension was lifted and on December 17, the offer closed with Neal and Massy enticing another 56 per cent stake from shareholders, which at full take up would push its holdings to 84.4 per cent.

But in stepped AMCL once again, this time with an injunction barring Neal and Massy from taking up the shares tendered. Within two days, NMH got the injunction lifted, only to run into yet another blockade - this time a more serious one.

On December 19, the BSC got the courts to block the deal saying it was concerned that the terms of the offer were not fully disclosed to all shareholders, suggesting that there could be side deals.

The regulator gave 15 days, ending the first week of January for affected parties to respond and be allowed a hearing.

Neal and Massy immediately denied any misdeed and issued a statement saying its lawyers were working on a response.

As the year closed its signal to shareholders was that it would proceed to take up the shares as soon as it hurdles this latest challenge.

A 'NONSENSICAL' RIVALRY

Mayberry Investments Limited has never explained what motivated its futile chase for coffee company Salada Foods Limited, though market speculation held that it was more a matter of upset than economics.

The speculation was that Mayberry was attempting to block Three Bears from reaching a 80 per cent take up, the required threshold for delisting.

The rivalry for Salada, while not a huge deal in terms of money value, was noteworthy for its inexplicability. In fact, Mayberry CEO Gary Peart said at the outset, that the brokerage was doubtful that Salada would remain profitable into the future.

"Salada presents the profile and profitability growth potential that we look for in companies to include in our acquisition strategy going forward, though it's continuing profitability is not a certainty," Peart said when Mayberry launched its hostile bid.

From the outset, Donovan Lewis who took a controlling 60.23 per cent stake in the company when he acquired a British Virgin Islands based operation known as Three Bears from the Caribbean Investment Fund, and subsequently acquired another block of the company's stock from the same source, was clear and unequivocal in his intentions not to sell.

Still Mayberry announced its J$172 million takeover offer in August at $32.50 per share, as Lewis was making his mandatory offer of $25.82 per share for the remaining 39.8 per cent of the listed company as required under stock exchange rules.

Mayberry, whose holdings in Salada were a negligible 0.3 per cent at the time of its hostile bid, would later increase its offer to $40.08 per share and extend the take up period.

This all signalled that no one was taking the company's offer seriously.

And while Mayberry continued to hold comment on its reasons, Lewis was characterising the brokerage's actions as a 'nonsense' bid while analysts gave it short shrift, saying it undervalued the coffee stock which was trading before Mayberry's one-sided fight at around $45 per share.

Even Lewis' offer was frowned on, but he was immune to the criticisms, having declared publicly that he was not interested in acquiring more than the 60.23 per cent of Salada he already owned.

Still, within the period, investors saw a stark appreciation in the value of the stock,which rose at one point to $70 per share, but has since settled back to $44.

At the end of the day, however, Mayberry was left with egg on its face. The company never did say how many shares were tendered under its offer, but another brokerage, Stocks and Securities Limited run by the father and son team Hugh and Mark Croskery, managed to snag 2.5 per cent of Salada within the same period without going to the expense of mounting a formal bid.

ROYAL BANK GRABS RBTT

The rumours had circulated in the market for so long, but denied so often that everyone knew the sale of RBTT would be a massive deal once the secret negotiations were wrapped up.

Not even shareholders of RBTT Financial Holdings were privy to information.

A nugget emerged after RBTT Financial conceded to receiving a proposal. In July, RBTT chairman Peter July would issue a public notice that a second party had made enquiries, and that the company was considering the two offers, one of which was rumoured to be from Canadian owned First Caribbean International Bank.

Two and a half months later on October 2 came the announcement: Royal Bank of Canada had made a US$2.2 billion cash and shares offer for the retail operations of RBTT Bank, which would expand its confined regional operations into a pan-Caribbean business and return the multinational to markets it once held in Trinidad and Jamaica.

"RBC's financial strength and depth of expertise combined with RBTT's market knowledge and position in the region provides the perfect foundation for us to continue growing and competing effectively within the Caribbean Basin and beyond," said July in the joint statement issued by the parties.

"This transaction sets the stage for Trinidad and Tobago becoming the financial center of the Caribbean."

RBC Caribbean is to be headquartered in Port of Spain.

"We want our Caribbean headquarters to be located in what is a key financial center for the region as well as a logical jumping off place for potential growth outside the Caribbean," said Peter Armenio, RBC's head of U.S. & International Banking.

Shareholders are expected to endorse the combination deal early in the new year for 60 per cent cash at TT$40 per share, and 40 per cent in a swap of RBTT shares for RBC ordinary units.

The deal is expected to close mid-2008.

Already, RBC has announced plans to rebrand RBTT Banks in 10 markets under the Royal Bank umbrella.

A MIX OF RUM AND BITTERS

On November 23, weeks into market speculation that persisted even after a denials by managing director William 'Billy' McConnell that Lascelles was considering a deal to sell, the company announced jointly with Angostura Limited that the latter would be bidding for 49.24 per cent of the 'voting rights' of the Jamaican conglomerate.

Even before the deal was announced, the Lascelles stock had shot up on the Jamaica Stock Exchange, but weeks into the announcement on a deal that was not so transparent, the stock vaulted through roof — almost triggering the circuit breaker at one point - to become the most expensive stock on the JSE in November, eclipsing even RBTT Financial and other cross-listed companies.

What was not immediately apparent was that the arrangement included a second tier deal that would eventually give more than 90 per cent control of Lascelles to Angostura.

The approximate US$900 million offer from Angostura - US$10.65 per ordinary share, and US$0.30 per preference unit - was for just under 86.5 million shares of 96 million ordinary outstanding units, and 5,028 of the 10,000 listed 6% preference shares, which together represented under 50 per cent of the voting rights. It was on that basis that Angostura declared the offer not to be a takeover.

Another 9.5 million ordinary stock units, just under 5,000 of the 6% prefs, and 50,000 issued 15% prefs owned by McConnell and Lascelles chairman George Ashenheim and held in two vehicles - Snowdown 2007 Limited and Calla Lilly Holdings Limited - were not announced initially as part of the deal. But, it would later emerge that the 9.5 million ordinary units held in Snowdon were also due to be transferred to Angostura at a later date for a nominal price of $2, though their value was in the region of US$100 million, and that 47 per cent of the Calla Lilly holdings would similarly be divested to Angostura.

McConnell and Ashenheim would later explain that US$10.65 (J$760) per share offer price had taken the value of the Calla Lilly/Snowdon holdings into consideration, and as such would benefit all shareholders.

But those explanations came after regulators demanded more details on the deal. Having got it, the JSE pronounced the offer as a takeover and instructed that the bid be structured accordingly.

Meantime, the Lascelles stock which peaked at $575 in the past two weeks remain strong at $565 at market close on the eve of Christmas or double +.

The next move expected is Lascelles director's circular advising shareholders about the details of the bid, which the company said would have been available as of December 27.

lavern.clarke@gleanerjm.com

Other Developments:

- Jamaica Money Market Brokers, the third largest brokerage by funds under management, began executing its push into Central America, starting with JMMB Dominicana in the Dominican Republic.

- Jamaica Producers Group, took aim at a bigger prepared foods market, and began building out its snacks business here in Jamaica and in Domincan Republic under joint venture.

- Close to yearend, speculation began to build that a 'mystery buyer' was acquiring Gleaner stock at a furious pace, ostensibly to launch a takeover bid. The rumours have sent the newspaper stock to a high of $4.20 per unit.

- MegaMart spread its wings to Bahamas and Trinidad, and added its third and largest store in Jamaica, investing US$20 million in the Montego Bay based operation which opened ahead of Christmas.

- The United Company of Rusal - a merger of Rusal, SUAL and Glencore - assumes the No. 1 slot as world's largest bauxite/alumina company ahead of Alcoa, giving the Russians a presence in Jamaica for the first time.