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Merger won't trigger mandatory offer for Carreras

Published:Friday | October 5, 2018 | 12:00 AMSteven Jackson

The largest but indirect shareholder in Carreras Limited will merge with another entity in the Netherlands, but the cigarette trader says it will not result in an offer to minority owners of the stock in Jamaica.

Carreras is directly owned by Rothmans Holdings (Caricom) Limited. The latter's company's parent, British American Tobacco Holding (Caricom) B.V., will be combining with its sister company Rothmans UK Holdings B.V. Both are based in The Netherlands.

The notice about the merger was posted after market close on Wednesday on the Jamaica Stock Exchange. The next day the stock recorded unusually large transacted volumes of nearly 46.3 million worth about $420 million. It was the largest daily volumes traded in the stock for at least two years.

The information on the trade or trades remains undisclosed for now, but any of Carreras' top ten shareholders could have executed the transaction based on the size of the portfolio. Managing Director Marcus Steele did not respond to requests for comment.

The Financial Services Commission has granted an exemption to Carreras' parent from having to make a an offer to buy out minority holdings of the Carreras stock, which is usually mandatory when ownership of a listed company changes hands. The regulator did not respond to queries on the basis for granting the exemption.

One brokerage theorises that it's because the transaction is all within the family.

"From the face of it, it reads that there is no impact to the Jamaican shareholders or the shareholders of Carreras on the JSE, but an amalgamation of the parent companies above Carreras for tax purposes and to lower the cost of maintaining all of these companies - maybe some are dormant now - and how they accrue back or report their financials to BAT, their parent, etc," said Mark Croskery, executive director of Stocks and Securities Limited.

The merger will result in Carreras' largest indirect shareholder merging with a sister company both incorporated in the Netherlands. There are over 35 companies incorporated in the Netherlands ultimately owned by British American Tobacco Plc, which in turn owns hundreds of other companies scattered across scores of countries worldwide.

Under the deal, all the assets and liabilities of British American Tobacco Holding (Caricom) B.V. will be transferred to the surviving entity, Rothmans UK Holdings B.V.

Rothmans Holdings (Caricom) holds 2.446 billion units or 50.4 per cent of the Carreras stock.