Berger Paints is worth more than $20 per share.
While the directors of Berger Paints are recommending minority shareholders accept an abysmally low $10.88 for the shares with one condition that the bidders as a result of the Offer its holding will most likely exceed 75 percent of the holdings.
No information was given as to how this was possible. Interestingly two entities that control more than 25 percent of the total shares in the company don’t appear ready to sell at least not at the low price offered.
Sagicor Investments, a subsidiary of Sagicor Group who controls more than 10 percent of Berger Paints shares have issued an analysis of the company and the fairness of the offer. They are advising investors to hold or buy more shares at the current low price. It would be an odd situation that the subsidiary of the group are recommending a buy or hold recommendation and the parent did the opposite. A fair conclusion is that they will not sell, in which case the offer fails as most investor thing it will.
Sagicor Investments concluded, “the business has made significant strides in the past three years. This has resulted in the company achieving phenomenal financial success as the company implemented its strategic goals. With a solid foundation established operational and financial performance should continue to improve over the medium term. Though the attractive dividend policy may change, the future earning potential should see the stock trading at a price to earnings ratio within the range of 10X – 12X. The stock is currently trading below this range.”
“Having considered the anticipated economic outcome along with challenges facing the company, including the strengthening purchasing power of domestic consumer, the growth trend in the construction industry and moderate growth in overseas market, the 12 month price target is within a range of J$17.05 to J$20.46.”
Carib Beer brewed in Trinidad by Ansa McAl Group
“Given the price expectation, the current offer of $10.88 is at a significant discount to the value of the company’s shares. Investors would better serve maintain the current position or take the opportunity to increase the position in the stock given the fall-off in the current market price. While there are risks, relating to changes in the management agreement and delisting, the future earning potential of the company should compensate for holding the stock.”
IC Insider.com got wind of a letter by Ideal Group of companies that commented a possible delisting Berger, “we are the largest minority shareholder in Berger Paints at 12%+ of the Company. We find the offer price of $10.88 by ANSA McAL to be woefully-inadequate and have chosen to reject the offer. In fact, given that the share price is now on or around $11 per share, we are buying Berger at this attractive price level, not selling.”
The letter goes on to say, “we are also aware that another leading minority shareholder, shares our views and has also rejected the offer. In fact, they are buying via the Jamaica Stock Exchange (JSE). Both parties between themselves own around 25 percent of BRG’s issued share capital.”
On investors on Monday bought 60,411 of the company’s shares, on Tuesday 153,142 units, on Wednesday 129,140 shares and on Thursday 148,982 units around or above $11 per share, a clear enough indication that the smart money is not buying into the Berger directors unfortunate recommendations.
