Fri | Sep 22, 2017

Mayberry CEO tags C&WJ as stock to watch

Published:Friday | February 24, 2017 | 2:00 AMSteven Jackson
Gary Peart, CEO of Mayberry Investments Limited.
Rezworth Burchenson, CEO of Prime Asset Management Limited and Deputy CEO of Victoria Mutual Wealth Management Limited.
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Gary Peart, chief executive officer of Mayberry Investments Limited, described Cable & Wireless Jamaica (C&WJ) as a stock to watch, based on market sentiment, as owners of the stock await word on whether the new owner of the telecoms would be mandated to make a pitch for their shares.

Peart, along with economist Keith Collister and pension fund manager Rezworth Burchenson were panellists at the Mayberry Investors Forum held on Wednesday, on the prospects for the Jamaican stock market in 2017.

"My other stock pick is not based on fundamentals but on market sentiment and emotions that we see out there in the market. The simple reality is that there is talk about this takeover by Liberty Global," said Peart in the closing minutes of his presentation.

Last year, Liberty Global acquired Cable & Wireless Communications (CWC) which owns a series of subsidiaries across the Caribbean, including Jamaica. It came a year after CWC announced a massive takeover of its Caribbean rival, that of Columbus Communications, which traded as FLOW.

"There seems to be this fierce battle between Liberty, who took over C&W at the parent level, and the Financial Services Commission (FSC), where it seems the FSC is insisting that they make a takeover offer for the minority shares. The reality is that we do not know what the outcome is going to be, but if the FSC wins that argument, then you should have some C&W," Peart said.

Liberty is an American company that acquired a British operation whose holdings included a local subsidiary listed on the Jamaica Stock Exchange.

Peart recalled other transac-tions that resulted in takeovers in Jamaica. Dutch company Heineken International acquired the shares in the holding company of Desnoes & Geddes Limited (D&G) from Diageo Plc of the United Kingdom. Subsequently, Heineken made a mandatory offer to take over the minority shareholdings in D&G.

Other takeovers

Burchenson, the CEO of Prime Asset Management, also offered up another example: British American Tobacco acquired the shares in the holding company of Carreras from Rothmans and then proceeded to make a takeover offer the minority shareholdings in Carreras.

D&G, which trades as Red Stripe Jamaica, was taken private by Heineken. Carreras continues to trade on the JSE.

The FSC previously told the Financial Gleaner that it expects a resolution of the Liberty matter in a few weeks but won't comment on whether it will ask Liberty Global to make a mandatory offer for the shares in C&WJ. Last year, a few minority shareholders of C&WJ argued that Liberty should make a mandatory offer and took their case to the FSC.

Liberty Global acquired CWC in a deal worth US$7.4 billion. CWC still directly holds 77 per cent ownership in C&WJ, but that stake, ultimately, is held by Liberty due to its acquisition. The rules of the Jamaica Stock Exchange indicate that 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 can then choose whether to accept or reject the offer. However, part of the discussion between the regulator and Liberty appears to include whether the JSE takeover rule applies to companies which acquire ownership indirectly in a listed stock.

Another takeover that is now being finalised could also be impacted by the decision. This month, Cemex of Mexico acquired majority ownership in Trinidad Cement Limited (TCL), based in Trinidad & Tobago. TCL is majority owner in Caribbean Cement Company, which is based in Kingston, and the takeover of TCL also gives Cemex majority control of Caribbean Cement.

Peart's other top picks offered at the forum included Berger, Caribbean Cement, Caribbean Flavours, Carreras, Dolphin Cove and NCB, among others. Burchenson's top picks include NCB, Caribbean Cement, Lasco Distributors, Purity, General Accident, Carreras, Pan Jam, and Eppley.

Collister, while avoiding top picks, estimated that the JSE Combined Index should increase between 30 and 50 per cent over the next two years.

steven.jackson@gleanerjm.com