Sat | Jan 20, 2018

TCL directors reject Cemex takeover offer again - Say fair price closer to TT$5.89 per share

Published:Sunday | January 22, 2017 | 12:00 AMSteven Jackson
The TCL plant at Claxton Bay in Trinidad & Tobago.

Directors of Trinidad Cement Limited (TCL) still plan to reject the revised offer by Mexican construction firm Cemex SAB, which they disclosed to shareholders of the regional cement maker just days before the new takeover offer closes.

Cemex, which wants to grow its stake in the regional cement maker to just under 75 per cent, increased its offer from TT$4.50 to TT$5.07 per share after TCL directors criticised the initial price.

The new offer closes January 24.

However, TCL directors, in an update to their initial circular assessing the revised offer, said it still fell short of the independent fairness valuation by auditors Ernst & Young (EY), which arrived at a price of TT$5.89 per share, based on two separate methods of valuation.

The price that EY assessed as fair was disclosed for the first time through the TCL Supplemental Directors Circular released on Thursday.

"In light of the fact that the offer price is below the range of values, the board has concluded that it would not be in the interest of shareholders to accept the amended offer of TT$5.07 per share. The board has carefully considered the amended offer and has concluded that the consideration to be received by shareholders under the amended offer is not fair, from a financial point of view, to the shareholders," the circular stated.

The directors indicated that notwithstanding the revised offer of TT$5.07 per share made by Sierra Trading, the vehicle used by Cemex to hold its TCL stake, the board of directors of TCL recommends that the bid "be also rejected".




On December 5, Cemex announced plans to increase ownership in TCL from approximately 39.5 per cent to 74.9 per cent. On December 9, TCL commissioned EY to do a fairness report. The EY review included analysis of TCL structure and markets; TCL's published financials; its cash flow forecasts between 2017 and 2021; TCL's prospects, initiatives and risks between 2018 to 2021; potential non-operating and redundant assets; and its return on investment.

Based on that review, TCL directors concluded that Cemex's offer understated the cement maker's true commercial value.

The TCL directors circular included a redacted version of the EY report, which avoided disclosing the fair price set by EY until now.

"In summary, the estimate of fair market value per ordinary share based on the income approach is TT$5.13 and that, based on the market approach, is TT$6.64, leading to an average of TT$5.89 per ordinary share. Our conclusion of the estimate of fair market per ordinary share would be expressed at TT$5.60 to TT$6.18, a plus or minus 5 per cent range around TT$5.89," stated EY in its fairness report.

On Friday, the TCL stock closed up 30 cents at TT$5.44 on the stock market in Port-of-Spain. The price remains at $63 on the Kingston exchange, where it last traded on December 15.