Campari offer sold to Lascelles shareholders as 'financially fair'
The Lascelles deMer-cado board formally recommended selling its core businesses to Italian spirits giant Campari Group, arguing that shareholders would receive a price 24 per cent above the highest independent valuation of the assets.
The Campari Espana's offer closes November 30. Trading in Lascelles shares will be suspended from November 26 until the offer closes.
Lascelles retained independent auditor Deloitte Touché Tohmatsu to assess the fairness of the offer, while utilising the services of former subsidiary Globe Insurance and consultant DC Tavares Finson Realty to determine the value of its insurable assets and real estate, respectively.
The sale of Globe Insurance to Guardian Holdings of Trinidad closed last Friday and on November 28 Lascelles will distribute a special dividend of J$33.18 per share - amounting to J$3.18 billion - as proceeds from the transaction.
For the spirits and merchandising businesses being acquired by Campari, Deloitte offered a low and high valuation price of US$2.92 and US$3.48 per ordinary share. Campari offered US$4.32 for ordinary shares and US$0.57 for preference shares.
"In the opinion of Deloitte, the offer price ... is above the range of values that they have identified through their analysis and can therefore be considered to be fair to the Lascelles shareholders from a financial point of view," said the Lascelles director's circular published Wednesday under the signature of chairman Gerald Yetming.
Campari has already received agreements with parties holding just over 90 per cent of total shareholding in Lascelles which effectively makes the director's circular a formality. That percentage will evoke the Jamaica Stock Exchange rule to delist the stock and the company.
Parties which have entered into agreements with Campari to sell shares include:
CL Spirits, 71.48 per cent holdings;
Calla Lily, 9.91 per cent holdings and 50,000 units of 15 per cent pref shares;
Angostura, 2.96 per cent holdings;
Colonial Life Insurance, 2.6 per cent holdings;
National Insurance Fund, 1.5 per cent holdings;
Fortress Mutual Fund (Barbados) 1.4 per cent holdings;
NCB Insurance, 0.4 per cent holdings;
NCB Capital Markets, 0.4 per cent holdings; and
Snowdown, 8,288 units of six per cent pref shares.
The Lascelles stock closed at J$412.05 (US$4.50) on Wednes-day, but traded lowly at J$275.17 (US$3.10) the day prior to the September acquisition announcement.
Deloitte argued that the stock is too "thinly traded and therefore may not reflect intrinsic value".
Consequently, in considering the fairness of the purchase consideration, Deloitte utilised the income, market and asset-based approaches in its valuation. These methods valued equity of the two core segments desired by Campari - Rum, Wines & Spirits and general merchandise - at US$280 million and US$334 million.
"In light of the fairness opinion, the asset valuations and the offer made by the offeror in respect of the core business, the board is of the opinion that the price offered for the Lascelles shares in the offer is acceptable and reflects the value of the Lascelles shares," noted chairman Yetming.
Additionally, Lascelles building and insurable assets were valued at some US$209 million by Globe Insurance. The value of its real estate topped US$40.7 million by consultant DC Tavares Finson Realty.
Two months ago, Campari announced plans to acquire 100 per cent of Lascelles remaining assets for US$414.75 million in what will become the Italian group's third-largest acquisition.
The deal will transfer the iconic Appleton rum brand made by a 186-year-old company, J. Wray & Nephew Limited, from Caribbean to European ownership.
Contextually, Lascelles was sold by its Jamaican owners to CL Financial Group of Trinidad in 2008 at a price that was double the Campari offer. The company fell into the hands of the Trinidad and Tobago government in 2009 when the state mounted a rescue of CL Financial and its insurance group CLICO. Trinidad owns 87 per cent of Lascelles but has 92 per cent voting rights.
The Lascelles board also expressed confidence in Campari's ability to grow Lascelles' brands throughout the world.
"Accordingly, the board recommends the offer to the shareholders," he said.
In addition to the distribution of Globe proceeds, Lascelles will pay an interim dividend of US$9.48 per share, bring its total distribution to shareholders to approximately J$4.1 billion next Wednesday.
The suspension of trading in Lascelles shares, which takes effect Monday, " will ensure that there is a static shareholders' register that will provide for an efficient closing of the transaction," the company said in a market filing this week.