Sat | Aug 19, 2017

Cloak descends on Liberty offer - FSC hauled into court as Liberty talks go underground

Published:Thursday | April 13, 2017 | 4:00 AMNeville Craham
Janice Holness, executive director of Financial Services Commission.

The outcome of the Financial Services Commission's (FSC) decision on whether Liberty Global is required to buy out minority owners of Flow Jamaica is now cloaked in mystery, but indications are that the fight has progressed to the courts.

The powerful international cable company has been fighting efforts by a group of shareholders to force a takeover offer for all shares in the Jamaican operation.

Weeks ago, the FSC said the issue would have been decided by March, but on Monday, Executive Director Janice Holness said the agency is now awaiting the outcome of litigation.

Neither Holness nor other officers of the FSC would say who filed the litigation - albeit that the logical assumption would be Liberty or one of its companies - when the case began, or what matter is being decided by the court.

"I cannot confirm or deny where we are," Holness said in a short phone call. "What I can say is that a matter has been filed before the Supreme Court for some time now. The FSC is obligated to respond. Of course, we are not able to opine or to give any further information regarding litigation that is ongoing," she said.

On Tuesday, asked outright what legal action it may have launched, Liberty Global told the Financial Gleaner: "No comment."

Legal sources say it is not unusual for some cases to be dealt with in camera at the courts, but the opaqueness of this action appears to go further, and it's unclear in this instance why the filing party wants to maintain such secrecy in relation to a publicly listed company.

If, as speculated, a decision is made by FSC in favour of the minority shareholders, it would set a precedent for such indirect acquisitions of listed firms, and, potentially, how future foreign deals are priced when it includes a listed Jamaican company.

Last year, Liberty Global acquired 100 per cent of Cable & Wireless Communications, a company based in London with regional headquarters in Miami, Florida. The deal was worth US$7.4 billion. Through this route, Liberty came into possession of 77 per cent of CWC subsidiary Cable & Wireless Jamaica, a company listed on the Jamaica Stock Exchange.

Stock market rules require the acquirer of a listed company to put in a mandatory bid for all outstanding minority shares. However, the rules are not explicit about indirect acquisitions, and so last summer, a group of shareholders asked the FSC to intervene and force an offer from Liberty.

In February, the FSC said negotiations with the global cable operator had advanced and a determination was expected within a month.

That the issue has progressed to litigation implies that the determination was not headed in Liberty's favour. Sources back in February told the Financial Gleaner that the FSC was preparing to direct Liberty to make an offer for minority C&WJ shares, but FSC Senior Director of Securities Laurence Crossley then declined to comment on that particular question.

This week, Crossley said the negotiations have not been finalised, but only cited "new issues" as the cause.

One of the issues that is expected to be determined is the price that Liberty would offer for the C&WJ shares. FSC has not said whether the offer would be based on the valuation of the Jamaican operation in the CWC bid - the CWC takeover was priced at 81.04 pence per share, which would have translated to $146 per share in local currency - or whether it would be based on the trading price of C&WJ shares on the Jamaican stock market.

Over the past year, C&WJ has traded within a range of 65 cents to $1.80 per share.

A regulatory decision that favours an offer for C&WJ shares could end up affecting Caribbean Cement Company Limited, another listed company whose foreign parent was acquired by a separate foreign firm.

Earlier this year, Cemex of Mexico, through Sierra Trading, successfully acquired majority shares in Trinidad Cement Limited of Trinidad & Tobago. Through that acquisition, Cemex now owns more than 60 per cent of Caribbean Cement.

neville.graham@gleanerjm.com