Fri | Oct 20, 2017

FSC, Liberty still haggling over mandatory offer for C&W Jamaica shares

Published:Friday | February 17, 2017 | 12:00 AMNeville Graham
In this September 9, 2015 file photo, Managing Director of Cable & Wireless Jamaica Garfield Sinclair reports on the company's performance to shareholders at their annual general meeting.

The Financial Services Commission (FSC) is not commenting on infor-mation that Liberty Global has been asked to make a mandatory offer for the shares in Cable & Wireless Jamaica, which trades as FLOW Jamaica.

But the regulator confirmed that discussions were ongoing and is predicting a resolution in a matter of weeks.

Last year, minority shareholders of C&WJ wrote to the FSC asking that the regulator instruct Liberty to make the offer for the Jamaican shares after the American company acquired Cable and Wireless Communication (CWC) in a deal worth US$7.4 billion.

The deal gave Liberty more than 77 per cent ownership of C&WJ, and under the rules of the Jamaica Stock Exchange, a takeover of more than 50 per cent of a listed company requires the new owner to follow up with an offer to acquire all of the remaining outstanding shares. Shareholders then choose whether to accept or reject the offer.

Liberty paid 81.04 pence per share for CWC in a takeover of all the company's assets spread across 18 markets, including Jamaica. It's unclear how the heavily leveraged Jamaican operation was valued under the deal - information that would be germane to any takeover offer for the minority shares in C&WJ, as the price paid for the majority stake must be matched or improved on under the mandatory offer.

The C&WJ shares were trading at $1.49 around the time of the takeover, which closed in May 2016. Now, they are trading at $1.26, a price well shy of its one-year high of $1.70.

Efforts to speak with representatives of Liberty Global, which holds the CWC businesses under its regional operation, LiLAC Group, were unsuccessful. C&WJ corporate communications director Kayon Wallace said it would be inappropriate for the company to comment as "any discussions with the regulators would be confidential".

Weighted down by debt

C&WJ's balance sheet is weighted down with debt of around $54 billion, but it is all owed to its parent company, which has been backing the Jamaican business with heavy infusions in the form of loans.

The company, currently led by Garfield Sinclair, has paid no returns to shareholders since 2008, as it racks up annual losses. At last report, its deficits had hit $29 billion.

The FSC initiated talks with Liberty last summer and this week, FSC senior director of securities Laurence Crossley indicated that the talks had advanced.

"We met with them and had discussions. Subsequently, there was back-and-forth communication and now there is a new issue that has come up and we are now dealing with it," Crossley said in response to Financial Gleaner queries.

Sources with knowledge of the talks told the Financial Gleaner that the FSC's position is that Liberty must make an offer for the shares, but Crossley would not be drawn on the substance of the discussions, nor what agreements had been reached to date.

"It has not been finalised. There are some new issues that have come up that we have to work on," Crossley said.

The group of minority C&WJ shareholders who want to force the mandatory offer are watching for the outcome of the talks. A member of the group said, based on legal opinion, they expect a mandatory offer from Liberty eventually. Failing that, the representative said, the group would take the matter to court.

"If nothing happens within the next 30 days, then we'll be proceeding to file an action against the company," the representative said.

Crossley says the issue should be resolved by March.

"From our standpoint, one way or the other, it will be resolved sometime next month," he said.

neville.graham@gleanerjm.com