Caribbean Flavours founders forego millions in sale of shares, deal concerns some directors
Anand and Dr Joan James sold all their remaining shares in Caribbean Flavours & Fragrances below market price to Derrimon Trading Company, but Anand said they took the hit in order to make good on an oral agreement struck more than two years ago.
The husband and wife founders of Caribbean Flavours and Fragrances (CFF) will forego "a substantial sum", having sold more than 23.3 million shares at $4.50 to Derrimon in December, at a time when the stock was trading almost three times higher at $12.30. The Jameses will receive $105 million for the shares.
In December, the shares would have been worth $287 million on the market.
However, on the face of it, the deal poses a dilemma for other shareholders since it prices the company lower than its current stock market value.
"When I give my word, it is my bond, unless the good Lord decides otherwise," Anand James told the Financial Gleaner.
James said he sold the shares to focus on other business opportunities. He and his wife no longer hold any shares in CFF, but Anand said he will remain a consultant and director, while Joan will retire from the business.
In early August 2014, Derrimon acquired 49 per cent of Caribbean Flavours and Fragrances for $121.2 million or $2.75 per share.
Derrimon's chairman and CEO Derrick Cotterell was appointed managing director of Caribbean Flavours in January 2016. Howard Mitchell was chairman up to August 2016, when he demitted the board to take up the chairmanship of the Financial Services Commission, a financial regulator whose remit covers the Jamaica Stock Exchange.
With the new transaction, Derrimon increases its stake in CFF to three quarters of the company.
James said the deal has raised concern among some of the board members.
"I cannot speak on behalf of the independent board members, but there was a question as to why I sold so low," he said. "I have explained my need to do other things with my time, energy and resources, and this move allows me that. I think they now understand why," he told the Financial Gleaner.
The oral agreement was struck when Derrimon initially acquired the 49 per cent stake in Caribbean Flavours. The price was set then, with the deal to be executed if the flavour company met certain performance criteria.
The structure was set in place to ensure continuity of the company, according to James.
"The company's performance is really looking good. The customers and suppliers have been sensitised to the changes and have responded with tremendous support," he said. "The new general manager, Mrs Janice Lee, has passed the learning curve and has a good grasp of the business. The staff is very motivated and the future looks really bright.
"I have zero shares remaining, but I will remain as a director and consultant with the company for quite some time in the future to ensure continuity," he said.
Cotterell did not respond to mailed queries up to press time.
Under the rules of the stock market, a company that acquires more than 50 per cent of a listed company is required to make a mandatory offer for all minority shares. However, Derrimon's intentions remain unclear.
Efforts at comment from the Jamaica Stock Exchange were unsuccessful up to press time.
A market notice posted on the exchange's website a week ago says Caribbean Flavours & Fragrances is seeking confirmation from Derrimon Trading regarding "the status and nature" of its acquisition of the 23,379,208 CFF shares and its "intention towards other shareholders of CFF".
On Thursday, the CFF stock closed at $11.80, valuing the company at $1.06 billion. At that price, a $4.50 offer to minority owners would discount their shares by 61 per cent.