Cemex guaranteed 35% stake in Trinidad Cement
Cemex has struck a deal with the board of Trinidad Cement Limited that will allow the Mexican company to increase its stake in TCL to at least 35 per cent, with the option to add another five per cent.
Cemex SAB de CV, which now owns 20 per cent of Trinidad Cement through a company called Sierra Trading - the maximum that was allowable per shareholder prior to Monday - has committed not to seek a stake beyond 40 per cent of the company under an accompanying deal to an upcoming rights issue.
That deal, referred to as a Subscription Agreement, was signed by Sierra and TCL on the same day that the Trinidadian cement maker's shareholders voted in Port-of-Spain to remove the cap on ownership of TCL shares.
Cemex is investing in the region at the same time that it is weighing plans to sell a piece of its Latin American holdings and other assets to pay down debt.
Under the deal struck with the 10-member TCL board, on which Cemex now has at least three representatives, the Mexican company will underwrite up to US$45 million of the rights issue, which is priced to raise up to TT$362 million (US$57m). The rights offer aims to raise at least US$50 million..
Sierra will take up its full allowable allotment under the rights offer that gives shareholders the option to acquire one additional share for every two held. Some 124,882,568 shares will be available for subscription.
The offer will be priced at TT$2.90 per share, a five per cent premium on Wednesday's trading price of $2.76. The stock has gained 43 cents since the offer was announced.
If Sierra Trading fails to reach its 35 per cent ownership target at the close of the offer, "then subject to receiving all required approvals, including shareholder approval, a private placement of TCL shares will be issued in favour of Sierra Trading in an amount that will permit Sierra Trading to achieve a shareholding of 35 per cent of TCL`s outstanding shares," said Trinidad Cement in a market filing.
The TCL board, under the leadership of Chairman and shareholder Wilfred Espinet, also signed off on an "exclusive" plan on Monday for Sierra to buy up the TCL shares that are not taken up during the rights offer, but under terms where Sierra's stake does not exceed 40 per cent of the publicly traded company.
The ownership structure of TCL is undergoing changes that, according to the board, will facilitate a new debt restructuring plan under negotiation with creditors.
The loan agreements of 2012 that lengthened the maturity profile of the debt by six years was placed on hold by the current board while it negotiated a new deal. Consequently, the company's near TT$2 billion of long-term debt was reclassified as short-term obligations.
Trinidad Cement is the dominant cement operation in the Caribbean. Its holdings include Arawak Cement of Barbados and Caribbean Cement Company in Jamaica, among other regional assets.
Cemex, through Sierra, is already the single largest shareholder in Trinidad Cement, but the new agreement will cement its hold on the company. Outside of its interest through TCL, Cemex also owns 4.96 per cent of Caribbean Cement through Scancem International.
The Mexican powerhouse, which boasts net revenue of US$15.7 billion and assets of about US$35 billion deployed around the world, is said to have been seeking a bigger stake in TCL since 2002, but was blocked.
Last August, a shareholder revolt by Espinet and others successfully ousted the old TCL board of directors following a series of court fights that were grounded in disagreements about the 2012 debt restructuring deal. The chief executive, Dr Rollin Bertrand, was also replaced.
Cemex executive Alejandro Ramirez Cantu, who at one time ran Cemex Costa Rico and more recently Cemex Puerto Rico and has been on TCL's board since April 2011, was immediately installed as acting group CEO of Trinidad Cement.
Bertrand has subsequently characterised the events as a manoeuvre in favour of Cemex.
In a letter to the press in January regarding the board's ouster, he wrote: "This had nothing to do with 'performance' but was really a thinly veiled plan to hand over control of TCL to Cemex as was proposed by certain businessmen in 2002."
Bertrand also noted that Cemex itself has had financial challenges since 2010. Other reports note that the cement maker's troubles extend even further to its US$14-billion takeover of Rinker Group of Australia in 2007, the eve of the global financial crisis.
Last week, the Mexican company reported debts of US$16 billion as at December 2014, and said it planned to pay down US$500 million of the liabilities this year from US$1.5 billion of proceeds expected from asset sales in Europe and other regions.
On Tuesday, Reuters also reported that Cemex CEO Fernando Gonzalez telegraphed that the company was considering selling five to 10 per cent of subsidiary Cemex Latam Holdings.
Distribution of Trinidad Cement's shareholdings at December 2013:
Sierra Trading: 20.00%
Baleno Holding: 8.21%
Unit Trust: 3.97%
Banks/pension funds: 16.88%
Insurance companies: 3.43%
Other foreign Investors: 1.85%
Total issued TCL shares: 249,765,136
TCL Board of Directors:
Wilfred Espinet - Chairman
Alejandro Ramirez Cantu - Acting CEO
Francisco Aguilera Mendoza
Jean Michel Allard
Wayne Yip Choy
Carlos Palero Castro