Derrimon sweetens CFF offer with interest payment
Derrimon Trading Company has offered a takeover price of $4.50 per share to minority owners of Caribbean Flavours & Fragrances, but market analysts say that the steep discount built into the offer will result in its widescale rejection.
The offer comes with a sweetener in the form of an interest payment, which is a first for mandatory offers on the Jamaican stock market.
Caribbean Flavours is trading at around $12 per share, but Derrimon struck a deal with company founders Anand and Dr Joan James in December to acquire the rest of their holdings in CFF $4.50 per share, or around one-third the market rate, in fulfilment of an agreement struck back in 2014.
Derrimon owns 49 per cent of CFF, but the deal with the Jameses will increase its stake to a majority 75 per cent. Ownership above 50 per cent triggers a mandatory offer to acquire all shares in the acquired business.
"Derrimon's takeover offer will be just a formality as per the JSE rules," said financial analyst Sushil Jain.
"I think they will not expect any shareholder to take up their offer I will be surprised if anybody takes up the offer," said Jain, who was speaking in his capacity as an analyst, and not as a director of Mayberry Investments Limited. Mayberry Managed Client Accounts holds shares in CFF.
Alongside the $4.50 price, CFF shareholders are being offered interest at the prevailing weighted average six-month treasury bill rate of 5.561 per cent from December 21, 2016 up to but excluding the date of settlement.
The offer to minority owners of CFF opens on January 20 and closes on February 10. The settlement date is February 23.
The offer document, which was published on the exchange on Tuesday, says the transaction with the Jameses will be completed at the same time as the mandatory offer.
"Stockholders should note that the offer price represents a significant discount of 62 per cent to the closing price of CFF's stock units on the junior market of the Jamaica Stock Exchange on January 16, 2017. The offer is necessary, however to comply with the takeover regulations and the rules of the JSE," said a press release from Derrimon.
Derrimon's chairman and CEO Derrick Cotterell did not return calls for comment, neither did the Jamaica Stock Exchange. Cotterell is also the managing director of Caribbean Flavours.
The CFF stock closed up five cents at $12 on Tuesday, while Derrimon traded 10 cents lower at $5.50.
Last Thursday, Anand James told Gleaner Business that he and his wife would forgo "a substantial sum", having agreed to sell their more than 23 million shares at $4.50 in December at a time when the stock was trading three times higher at $12.30. The James will receive $105 million from the transaction, which marks a total exit of their investment in the flavour company.
James said he sold the shares to focus on other business opportunities.
Anand said he will remain a consultant and director, while Joan will retire from the activities of the business.
Derrimon previously acquired 49 per cent of Caribbean Flavours for $121 million or $2.75 per share in August 2014.
Derrimon distributes dry and frozen bulk commodities, and sells its own brand of products under the Delect label. It also owns and operates a retail chain known as Sampars.