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SLU Beverages Limited Takeover of Banks Holdings Limited (BHL)

Submitted by Atrue Freeman How is the bid by SLU Beverages Limited to takeover Banks Holdings Limited (BHL)  likely to playout? History of similar events suggests that BHL’s directors will have a significant, possibly the most significant, influence on the outcome […]in relation to BHL’s small shareholders. It may be worthwhile to explore how the…

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Submitted by Atrue Freeman

banks-beerHow is the bid by SLU Beverages Limited to takeover Banks Holdings Limited (BHL)  likely to playout?

History of similar events suggests that BHL’s directors will have a significant, possibly the most significant, influence on the outcome […]in relation to BHL’s small shareholders.

It may be worthwhile to explore how the directors of BHL are likely to perform vis a vis the performance of the directors of Light & Power Holdings Ltd. when Emera Inc. launched its bid to takeover LPH.

My recollection of the endgame in Emera’s takeover of LPH is that the LPH directors commissioned and received a valuation of approximately $25+ to $32+ per LPH share and recommended that shareholders accept the lower end of the valuation of $25+.  This notwithstanding that LPH’s main business was the provision of an essential service (electricity) and that LPH was a monopoly (only entity providing the essential service that it did).  It certainly appeared that there was a strong case for the directors to recommend to the shareholders that a price nearer to the upper end of the valuation be sought, even if it meant soliciting an alternative bid.

Would BHL be a good fit for Goddard Enterprises Ltd. and would GEL respond favourably to an invitation to bid, even a stock for stock bid, for BHL?

The below link describes the opposition to SLU Beverages Ltd.’s acquisition of its initial equity interest in Banks Holdings Limited at $4 per share in 2010, the same price being offered in 2015 in an attempt to takeover BHL.  But this issue has a wider reach. Sagicor Financial Corporation owns around 6+% in BHL.  While a minority shareholder, SFC has the ability to be heard on this matter and the responsibility to defend its investments on behalf of its many shareholders.

http://www.broadstreetjournalbarbados.com/business-briefs/2011-02-15/shareholders-protest-actions-of-bhl-board

130 responses to “SLU Beverages Limited Takeover of Banks Holdings Limited (BHL)”

  1. Atrue Freeman Avatar
    Atrue Freeman

    If I were a major shareholder, with representation on the BHL board and the influence that goes with being a major shareholder, I would not allow the 2010 SLU deal to acquire 20% of BHL at $4 per share. And, with the improving outlook, I certainly would not sell my 20% interest to SLU at the same $4 per share in 2015. I am sure there is a logical explanation for the two transactions, however.

  2. David Avatar
    David

    Thanks, the question then is why did the Board seek that avenue to finance BHL.

  3. de Ingrunt Word Avatar
    de Ingrunt Word

    @Freeman, I accept that you do not like the SLU buyout offer but can you please give any analysis on why the deal is bad other than on patriotic sentiment?

    You said you would not sell at @ $4.00. OK.

    What do you mean by “improving outlook”? Does Banks have clear projections for beer sales improvements or improvements at PHD? Are they going to ink a deal to increase tetra pack juice and milk sales in US, Europe or region?

    Someone earlier made the observation of financial raiders who gobble up conglomerates like this and then sell off key parts at nice profits, reduce staff and laugh all the way to the bank with nary a care about the havoc they create. Is this your fear here?

    Someone else touched on the large beer merger which I noted in my first or second post on this subject and wondered if this play will result in a shuttering of the Banks factory and production started somewhere else. Is that your concern also?

    Just trying to get a feel for what is really going on as since that 2010 story from Hoyos there has obviously been no shareholders’ class action suit of the Board and their actions obviously continue apace.

  4. Bush Tea Avatar
    Bush Tea

    @ David
    “…the question then is why did the Board seek that avenue to finance BHL.”
    +++++++++++++++++++++++++++++++++++++++++++++++++
    …you are 80% towards the answer when you look at WHO is the board…

  5. Artaxerxes Avatar
    Artaxerxes

    de Ingrunt Word September 29, 2015 at 1:06 AM #

    “Thus your comments that ” …The additional issue of 10 shares would cause the other shareholders’ share value to be diluted (i.e. the stock would decrease to $5 per share).” are not perfectly accurate.”

    You are CONFUSING the issue. A company issuing new shares through PRIVATE PLACEMENT is a COMPLETELY DIFFERENT PROCESS from that of a company issuing new shares through the stock market.

    When a public company issues new shares, the process is regulated by the SEC and require adherence to strict financial reporting criteria, which must be done on a regular basis.

    Issuing shares by private placement DOES NOT INVOLVE THE PLACING THE NEW SHARES ON THE STOCK MARKET. It is a PRIVATE TRANSACTION between the company and the potential investor. In simple terms it’s basically a risk the company takes in order to get some fast cash.

    Hence, your comment: “That decrease will depend on the investor confidence in the company,” is INCORRECT and your “Google” example is irrelevant within the context of this “discussion.”

  6. Artaxerxes Avatar
    Artaxerxes

    @ De Word

    I will give you another example from a MORE QUALIFIED SOURCE, and then perhaps you will understand.

    The following excerpt was taken from “Investopidia.” You could probably challenge them on their information:

    PRIVATE PLACEMENT IS AN ISSUE OF STOCK EITHER TO AN INDIVIDUAL PERSON OR CORPORATE ENTITY, OR TO A SMALL GROUP OF INVESTORS. Investors typically involved in private placement issues are either institutional investors, such as banks or pension funds, or high-net-worth individuals.

    If the company conducting a private placement is a private company, THEN THE PRIVATE PLACEMENT OFFERING HAS NO EFFECT ON SHARE PRICES BECAUSE THERE ARE NO PRE-EXISTING SHARES.

    WITH A PUBLICLY TRADED COMPANY, the percentage of equity ownership that existing shareholders have prior to the private placement is diluted by the secondary issuance of additional stock, since this increases the total number of shares outstanding. The extent of the dilution is proportionate to the size of the private placement offering.

    For example, if there were 1 million shares of a company’s stock outstanding prior to a private placement offering of 100,000 shares, then the private placement would result in existing shareholders having 10% less of an equity interest in the company.
    However, if the company offered an additional 1 million shares through the private placement, that would reduce the ownership percentage of existing shareholders by 50%.

    THE DILUTION OF SHARES COMMONLY LEADS TO A CORRESPONDING DECLINE IN SHARE PRICE, at least in the near term. The effect of a private placement offering on share price is similar to the effect of a company doing a stock split. The long-term effect on share price is much less certain and depends on how effectively the company employs the additional capital raised from the private placement.

    However, I’m not going to prolong the issue with you because it’s getting us nowhere. So, in “de Words” of the blog master: “you have the last word.”

  7. de Ingrunt Word Avatar
    de Ingrunt Word

    @Artax, you are the expert. I accept that. But why are you being so didactic and unnecessarily theoretical.

    Your last two posts highlight what I have said already and for some strange reason completely overlooks the most IMPORTANT aspect with any stock placement: the MARKET will be the final arbiter of stock price.

    My Google example spells out market effects on a SHARE issue. Period. Whether its a private placement or a public offer is IRRELEVANT.

    I stated and repeat the share price will NOT necessarily fall particularly if the stock market is robust and strong and the company enjoys strong investor confidence.

    For goodness sake when or how can a private placement invalidate or be superior to overall market conditions. NEVER,

    If you need me to tell you that you are right then ok. You are right.

    But for those who understand finance this is a circuitous debate. You are saying nothing different to what I am saying . But whereas I am returning to the bottom line you are being stultifyingly theoretical.

    Take for example from your source that “THE DILUTION OF SHARES COMMONLY LEADS TO A CORRESPONDING DECLINE IN SHARE PRICE, at least in the near term.” I have already shown that is not correct in all cases.

    Even more theoretical ” The effect of a private placement offering on share price is similar to the effect of a company doing a stock split.” I have already also give examples of that with my Artax Inc. and BU shareholder example.

    That is excellent theory that where a purchase of 10 new shares in a company with 10 original shares reduces early owners to a 50% loss (like a stock split as Investopedia says).

    But the original shareholder still retains his value in the company whether as one share worth now only 50% proportional value or as two shares if there was a stock split.

    Again I ask Artax is this not all subordinate to the overall stock market and investor confidence? Can’t a company with a stock split or a large secondary offer (private or public) not increase their price per share?

    Warren Buffets’ Berkshire Hathaway currently has a stock value of $193,000/share. One hundred and ninety-three thousand!

    All other things being equal, are you telling me that if he announced tomorrow that he wanted to get cash for a major investment in some new technology and was going to do a private placement of 3 million shares (for purposes of this example lets assume share issuance is currently 1M) or that he was going to do a 3-1 stock split that his share price would plummet to a third of its value?

    Rather the likely influx of potential buyers would blow that share price to a higher value (combined 3 shares) than the original!!!

    Artax, your theory is fine. But lets deal with the real situation. That is all I have been saying from the git go.

    Private placements are SUBORDINATE to the market they will not roil it in any greater way that other market moving actions.

    But as I said you are right so we are dun on this now I believe.

  8. Artaxerxes Avatar
    Artaxerxes

    @ De Word

    I’m not going to engage you any further on this matter.

  9. Artaxerxes Avatar
    Artaxerxes

    @ De Word

    Oh, yes, and I accept that you are CORRECT, since you are trained and qualified in this area and you do this for a living.

    Shiite……

  10. de Ingrunt Word Avatar
    de Ingrunt Word

    No prob Artax, I enjoyed the discourse. Took me right into my sweet spot.

    I’ll raise you a ‘call’ on that GHL private placement imbroglio and take up the ‘option’ at a later date. LOL.

    BTW, Berkshire has 2M shares issued. Looked it up afterwards.

    And here is my final ‘put’ option on the other finance debate.

    I really should have made the Berkshire example more realistic as they would never issue 3 million class-A voting shares whether private placement or otherwise based on their history. But I hope the point resonated

    Or then again I could have quoted what they DID so with their class-B shares back in 2010 rather than focus of that gargantuan class-A price to grab attention. So here it is:

    “Berkshire shareholders approved a 50-for-1 stock split of Berkshire’s Class B shares yesterday…The lower price is seen as an opening for small investors who couldn’t afford the old four-figure price tag…After the first thirty minutes, the Baby Bs are up 4.8 percent to $72.88 from the split-adjusted close of $69.50 ($3475 per share pre-split.)”

    Additionally at that time their Class-A shares also increased in value by a few % points.

    So can we agree to disagree based on the facts or will you still tell me that this is NOT a private placement and is therefore irrelevant too??

    A FIFTY-to-ONE pop or a 5,000% dilution and the share price INCREASED!

    Markets work on investor confidence and not theory always, Artax!

    That’s why they say life is sometimes stranger than fiction.

  11. Hants Avatar
    Hants

    Bottom line is Banks will be owned by Brazillians.

    The ownership of Barbados will be “diversified “.

    Maybe you should start teaching Portuguese and Chinese in primary school.

  12. Hants Avatar
    Hants

    What will happen to foreign owned Barbados companies when the owners do what they think is in the best interest of their investors,

    It might make sense to close Banks brewery and Pine Hill dairy and import Brazillian Beer and and Milk products. Now that is completely absurd thinking on my part.

    Then there is BL&P.

    http://thechronicleherald.ca/business/1313717-emera-completes-1.9-billion-debenture-sale-for-teco-deal

  13. Due Diligence Avatar
    Due Diligence

    Hants

    You are correct that they should start teaching Portuguese and Chinese in primary school. And Spanish.

    I said in my post at September 28, 2015 at 3:16 PM

    “This could be good news, if Ambev SA, known as Inbev Participacoes Societarias SA leaves the manufacturing plant in Barbados and use their marketing might to increase the distribution to other untapped markets – like Sandals/Almond.”

    Look at how the tourist arrivals have increased since Butch opened Sandals.

    BUT; On the other hand, Ambev could move Banks manufacturing to a more cost effective plant in one of the Latin American jurisdiction where its has manufacturing plants.

  14. Hants Avatar
    Hants

    @ Due Dilligence,

    Ambev could also make a decision to close down Banks and get rid of the brand. More absurd thinking on my part.

    When you sell your ASSets you give up control and the new owners can do what ever they want.

    I am hoping that as Emera expands in North America they decide that BL&P is small potatoes and sell it back to Bajans. Just wishing and hoping.

  15. Bush Tea Avatar
    Bush Tea

    @cHants
    I am hoping that as Emera expands in North America they decide that BL&P is small potatoes and sell it back to Bajans. Just wishing and hoping
    ++++++++++++++++++++++
    Sell? wuh boss, they have ALREADY skimmed off all the fat…

    Bushie is betting that at the appointed hour, they will GIVE it to Bajans ….to government that is…
    But by then it will be in a state of abandonment….
    … so we will have to spend millions to knock down the junk left behind
    … Borrow hundreds of millions to build um back
    .. and then BEG a kind hearted foreigner to take um and see if we can get some power.
    …. and of course provide 50 tax-free years in the process.

    Just like Almond….

  16. David Avatar
    David

    @Bush Tea

    Isn’t BL&P investing in a solar farm?

  17. Atrue Freeman Avatar
    Atrue Freeman

    de Ingrunt Word September 29, 2015 at 7:26 AM # @Freeman, I accept that you do not like the SLU buyout offer but can you please give any analysis on why the deal is bad other than on patriotic sentiment?

    My positive sentiment is based upon publicly available information, including the financial reports and comments made by the CEO over time. Of course, different individuals may come away with differing feelings from the same information. And, at the very basic level, if we were to accept $4 as a fair price in 2010, I have observed nothing to suggest a decline in prospects for BHL to the extent necessary to negate the subsequently undistributed earnings.

  18. Colonel Buggy Avatar
    Colonel Buggy

    And while Massy is peddling its ”Massy Card’ at every shop door, it has shown its yellow card to the employees of what we knew as Super Centre JB’s. Owen like he is right, even more people will find themselves on the breadline.

  19. Gabriel Avatar
    Gabriel

    John Simpson was a successful entrepreneur when he sold JB’s back when.Rumour has it that he signed an agreement with BS&T that he wouldn’t open another supermarket in under 10 years.He like buying and selling so he could take over JB’s again and re open a supermarket and train up a young black bajan to own it and run like how Sir Seale did with Bynoe.
    BTW I saw a strange name and a European looking man on TV tonight and he was listed as Chief Operating Officer of Cave Shepherd.I hope I am wrong but if I am right, the man can hardly speak English and his name looks hungarian or east european.You mean after 110 years or so that this local store can’t hire a native black man to call Chief Operating Officer.I voting with my feet and pocket accordingly.

  20. Atrue Freeman Avatar
    Atrue Freeman

    There is also the possibility that SLU wants only its 40% for now, but is forced by law to make the offer to take over BHL. If this is so, the $4 offer may succeed.

  21. Bush Tea Avatar
    Bush Tea

    @ David

    Isn’t BL&P investing in a solar farm?
    ++++++++++++++++++++++++++++++
    Boss… is it not passing strange that all along BL&P had nothing good to say about Solar energy until BAJAN small companies (and Bizzy) started to show how easy and viable it is…?
    Suddenly they had quotas and limits and all kinds of reasons why the FEAR trading Jokers should limit these new businesses…

    All of a sudden, the lotta Solar is no longer a problem and we hear that BL&P will now invest large scale…in solar.

    If the electricity generation future of Barbados is to be Solar based, what is it that says that BL&P and not individual Bajans are the ones to have this market reserved for themselves?

    That monopolistic shiite only made sense in the days of centralised generation. Emera therefore now has a catch 22 problem where they either need to invest in traditional generators for the near future (at great expense and risk) or admit that the future is one of RE and solar …and face the challenge of competing with individual owners of solar systems.

    They will fall victim to changing technology very shortly….

  22. Bush Tea Avatar
    Bush Tea

    On the question of National Assets being auctioned off…. it is quite amazing that so many people fall for the hype…
    There are some things that SHOULD NOT BE FOR SALE…… as a matter of personal/national pride.

    One does not sell one’s children…
    One does not sell one’s principles
    One does not sell off one’s birthrights

    Why should a few individuals who happen to be in position to exercise control on such vital national assets be allowed to place them forever out of the hands of our future citizens – EVEN IF MAKING A PROFIT IN THE PROCESS?

    What gives these trustees the right to FOREVER condemn our children to be servants to these foreign owners – back into the position of depending on their favour just like our forefathers were in slavery..?

    There ARE some things which we make for sale …..these are PRODUCTS…such as rum, sugar, tourism, etc. THESE are what we should be selling…

    ONLY A JACKASS would sell off the only 166 square miles we can EVER have …to strangers for a little shiite profit…

    Only a jackass sells off his children’s only home to strangers – and force them to have to rent from the new owners at whatever rates set… or their only POWER COMPANY and then have to pay through the nose for power…

    …or the ONLY national bank; The supermarkets; the damn hotels; and now even the beer…

    What the hell could be more obvious….?
    …and we have jokers talking shiite about how such transactions are ‘common’, are ‘legal’; are ‘normal business’……what they ‘are’…. is alotta shiite.

  23. Alvin Cummins Avatar
    Alvin Cummins

    @Bushie,
    Isn’t BHL (formerly part of BS&T) owned by Massey? Don’t they make the decisions”

  24. Bush Tea Avatar
    Bush Tea

    Buzz off Alvin….go and deal with AC and Clare..

    Bushie is talking about NATIONAL level decision-making that is built on a VISION of who we are as a people; where we have come from; and where we wish to go….
    ….not about leaving such critical issues up to JAs like you and your bribe-taking associates…

    Instead of depending on investments in ‘education’ to inform bowls about the danger and folly of selling off their own vital asses …oops assets… to the highest bidder, Dipper should have written it into the constitution …instead of the damn public order act…

    That way, despots like Fields et al would have had to find OTHER schemes, than selling off our young people into slavery, to raise his pieces of silver….and false knighthood..

    …and Bushie won’t have had to respond to complete brass bowls suggesting that the deal is OK because “it was made by foreigners anyway”…. ‘wh get to make the decisions…’

    JA… that is the point exactly…. shiite man!!!
    Steupssss

  25. TheObserve Avatar
    TheObserve

    @DIW
    You lost me completely. Please explain some more. It seems to me as if you are creating money from nowhere. 10 shares at $10.00 give the company a worth of $100.00. Creating 10 additional share will not make the company worth $200.oo. Instead each share will now be worth $5.00.

    Help…..

  26. de Ingrunt Word Avatar
    de Ingrunt Word

    @Observer, I denominated in % to make the point that overall equity share ownership of a company would fall from 50% to 25% for the original two sets ( 5 + 5 individual shares) of shareholders with the issuance of 10 more shares.

    The actual value of the company was not discussed but you are intuitively making a calculation it seems with the $200 value.

    But as you state increased share issuance does not inflate the value of the company so that was not being suggested.

    The entire palaver was about dilution and the impact of a secondary share issue (whether private placement or public stock exchange issued).

  27. Hants Avatar
    Hants

    What happened to all the cash these Bajans acquired from the sale of companies like BS&T ?

    Did the Trinidadian owners pay the cash into Barbados Bank accounts or did the money drift away.

    I keep hearing about White ownership of businesses in Barbados selling them to foreigners but did the whites leave Barbados and take the money with them ?

  28. David Avatar
    David

    Noted, will update in next rotation.

  29. Atrue Freeman Avatar
    Atrue Freeman

    http://www.thebhlgroup.com/page.cfm?p=pressreleases&read=Notice-To-All-Shareholders-of-BHL

  30. Gabriel Avatar
    Gabriel

    The only difference as compared to the old,outspoken slavery is that the employee of today appears to be free in that he is not sold once for all but piecemeal by the day,the week,the year,and one owner sell him to another being the slave of no particular person but of the whole property owning class……..with apologies to Engels

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