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TCL directors urge shareholders to reject CEMEX takeover bid

Published:Wednesday | December 28, 2016 | 12:00 AM
The Caribbean Cement Company at Rockfort, Kingston. Trinidad Cement Limited is the parent company.

Shareholders of Trinidad Cement Limited (TCL) are being urged to reject an offer by the Mexico-based cement giant, CEMEX to take over the company.

Earlier this month, CEMEX, announced plans to take over TCL, reviving moves of a takeover more than a decade ago.

But in a circular issued last Friday, the TCL board of directors recommended that shareholders reject the TT$4.50 (one TT dollar =US$0.16 cents) per share takeover bid, noting that the offer price does not reflect the "full commercial value of TCL."

The board argued that the shares of the company have a greater value than the offer price, which it said was "not fair, from a financial point of view, to the shareholders."

While the board did not say what would be a fair price, it advised shareholders that TCL is poised to benefit from the significant operational improvements instituted in August 2014.

"The company has experienced a turnaround after multiple past efforts to do so. The evidence of the turnaround is supported by the company's return to sustainable profitability in 2015 and continuing to produce positive net income throughout 2016," it said.

"The board has embarked on a number of operational and corporate restructuring initiatives that continue to generate positive value for the company," the board added.

Last week, former TCL chief executive officer, Dr Rollin Bertrand, accused the Mexico-based cement giant of engineering a takeover of the local cement manufacturer since 2014.

CEMEX, through one of its indirect subsidiaries Sierra Trading, said it is seeking to acquire 132,616,942 shares at a price of TT$4.50 (US$0.72) in cash per TCL share.

CEMEX currently owns 39.5 per cent of TCL, which announced at the end of October that its revenue had declined by 12.2 per cent for the first nine months of 2016.

But Bertrand, in a letter published in the media in Trinidad, noted that in 2002 CEMEX "came with a ridiculous offer of US$0.92 cents per share" for TCL, which was rejected.

Bertrand, who was removed from his post in August 2014, said the current board of directors must engage a "reputable investment banking firm to value TCL's shares and then make a recommendation as to whether to accept or reject CEMEX's offer".

"Unfortunately, the board cannot rely on management's assessment of CEMEX's takeover price as it has placed CEMEX managers in all critical positions," Bertrand said, adding that "conflicts of interest with CEMEX directors will have to be carefully managed."

The TCL directors also pointed out that CEMEX is only offering to acquire up to 74.9 per cent of the issued shares of the company. One condition of the bid is that any shares in excess of that limit will be taken and paid for on a pro rata basis.

"In those circumstances, the remaining 25.1 per cent shareholders may find that their shareholding has been depleted, and the board needs to consider the future of the company as it relates to the significant number of minority shareholders who will remain with a depleted minority shareholding," the board said.