Berger directors failed to accept Ansa offer

Berger Paints annual report had some good news for investors to digest.

Berger Paints Jamaica (BRG) directors, used a number of unsupported information in highly recommending acceptance by minority shareholder of an offer by ANSA Coatings International to acquire their holdings last year.
The minority shareholders rightly ignored the directors recommendations in rebuffing the offer of $10.88 per share with just over 6 million units out of 105 million were surrendered. The stock now trades at $19 back to the level it traded at before the offer was made.
The directors’ circular apart from highly recommending acceptance of the offer, based on what they must have considered to be a fair price following PriceWaterhouseCoopers Tax and Advisory Services

” fair value assessment of the price among other factors. The recommendation went on to say that directors Michael Fennell, Warren McDonald and Milton Samuda along with employees Huron Gordon, Gladys Miller and Jacqueline Warren-Wilson intend to accept the offer. No intention was telegraphed by director Pokar Chandiram who subsequently passed on.
After the closing of the offer, a notice posted on the Jamaica stock Exchange website on October 26, 2017, reported that “Berger Paints Jamaica has advised that a Director and a Senior Manager sold a total of 437,895 BRG shares in response to the take-over bid offer by ANSA Coatings International, during the period the Offer was open and at the Offer price.”

Andy Mahadeo, the Managing Director

The amounts mentioned above represent shares held by McDonald and Miller. The annual report for December 2017 was revealing, as it still had all directors’ shares listed in their own names or that of their connected parties. Only Gladys Miller is shown as having disposed of her shares.
In their opinion they said,” in your directors view, it is highly likely that acceptance of the offer will take the aggregate holdings of ACI beyond 80 percent, in fact the Offeror had made it clear of its intention to delist the Berger shares if it acquires 29% or more of the shares.” “It is therefore clear that Berger Jamaica shares will in all probability be delisted from the JSE.” The directors offer no information from coming to such a conclusion.
The latest information, clearly does not sit well with the strong recommendations made to shareholders to accept the offer. IC was advised that the registrar never received the acceptance documents within the time frame required to accept the offer and the matter only surfaced when enquiries were made about nonpayment for the shares. Some directors are adamant that they accepted the offer by submitting the acceptance form. IC has been unable to determine where those applications went, suffice to say that they never got to the right place to effect acceptance. Up to Monday this week the shares were not transferred and were still in the names of the directors. With the offer having been closed those shares can no longer be a part of the offer and any disposal would have to be on different terms than that offered in 2017 with the stock now trading at $19. At any rate the notice from Berger to the exchange only mentioned one director with no mention of the others. This matter along with the poor judgement in advising shareholders about acceptance again raises questions as to the suitability of the directors to protect the interest of minorities.

Bulls take charge of Exchange Place

Bulls at large in down town Kingston again

The Main Market of the Jamaica Stock Exchange closed at another record on Friday with 21 securities changing hands in the main market and 3 in the US dollar market and 22 in the Junior Market.
At the close, the JSE All Jamaican Composite Index jumped 8,028.94 points to a record close of 313,990.54 and the JSE Index to surged 7,315.27 points to 286,080.89. The Junior Market rose 48.58 points to end the week at 3,034.13. The US dollar Index fell 2.29 points to 183.01.

Friday’s move pushed the market outside of the medium term channel it has been trading in since 2014 and if the price of NCB holds, the break out for the market will be significant as it move on to the 360,000 points level.
NCB Financial traded at a new record of $107 and is ahead of the $102 it traded at in Trinidad on Friday, up until today it trailed the price of J$100 it was trading at in the twin island state. Berger Paints traded at $14, after news broke on Thursday that only 6.6 million shares were sold by minority shareholders to Ansa Coating following the company’s mandatory offer of $10.88 per share. Attempts were made to trade it as high as $17.50 but the price exceeded the 30 percent limit it could trade at for the day and was cancelled at the close of the market. Trading closed with bids to buy Berger ranging from a low of $11.02 to a high of $14 to purchase 259,773 shares, 204,458 units are on sale from a low of $16.75 for 41,583 units to mostly 89,388 at $22.
For the year to date, the All Jamaican Composite Index is up 49.4 percent and the JSE Index 48.8 percent.
In the foreign exchange market at midday dealers bought US$13,372,228 at J$127.31 and sold US$11,367,821 at J$127.74.

6M Berger shares taken up?

Trading in Berger Paints shares are now trading after trading was suspended two Thursdays ago.

Trading has resumed in Berger Paints after it was suspended ahead of the closing date for the offer by Ansa Coatings to acquire the minority shares at $10.88.
Trading took place between $11 and $11.50 with 213,774 units changing hands. So far the company has not released information on the number of shares that were offered as a result of the offer. IC gathers that the take up is around 6 million units, if so it would represent around 3 percent of the issued capital of the company.
this would be in keeping with some of the to minority shareholders coming out publicly against the offer price and with more than 31 percent of the holdings held by entities that were not in support of the offer.

All Jamaica cracks 300,000 for first time

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Jamaica Stock Exchange all Jamaica Index closes above 300,000 on Friday.

The JSE All Jamaican Composite Index surged 5,376.82 points to close above the 300,000 points level for the first time, as JMMB Group, NCB Financial and Scotia Group recorded strong gains and pushed the index to a record close at 300,363.16.
The JSE Index jumped 4,898.89 points to close at a record 273,664.81 and in the US dollar market the USD Equities Index closed at 184.36.
Come Tuesday, when trading resumes it will be interesting to see how NCB trades since the stock closed at the equivalent of $100 in Trinidad on Thursday. At the close on Friday, there were only 33,603 units on offer for the stock. A break out of NCB is likely to see the market moving decisively away from the resistance, around the 300,000 points level. On Tuesday, Berger Paints that was suspended pending the closure of the Ansa Coating mandatory buyout offer, at the end of the day there were information on the out-turn of the offer.
Trading on the main market of the Jamaica Stock Exchange finished on Friday with 22 securities changing hands, 7 advanced, 6 declined and 11 traded firm with 4,504,312 units valued at $68,391,852 compared to 94,545,441 units valued at $1,119,081,050 on Thursday. In the US dollar market 425,898 units traded for a value of US$102,239 for two securities.
Trading ended with an average of 204,741 units for an average of $3,108,721 in contrast to 4,110,671 units for an average of $48,655,698 on Thursday. The average volume and value for the month to date amounts to 2,279,320 units valued at $30,989,186 and an average of 2,498,747 units at $34,245,233, previously. In contrast, September closed with average of 283,480 units at $3,630,990 for each security traded.
IC bid-offer Indicator| At the end of trading in the main and US dollar markets, the Investor’s Choice bid-offer indicator reading shows 7 stocks with bids higher than their last selling prices and 2 with lower offers.

Stinking Berger behaviour

There are some strange and shocking developments regarding the offer by Ansa Coatings International to purchase the minority shares in Berger Paints Jamaica.
First the directors in recommending that shareholders accept the offer made critical claims that are not back up by facts and they offer no information to support same. Secondly, the shares have been suspended in questionable manner and without adequate reasons.
The directors in recommending that shareholders accept the offer said,” in your directors view, it is highly likely that acceptance of the offer will take the aggregate holdings of ACI beyond 80 percent. Under the rules of the Jamaica Stock Exchange, where one shareholder either individually or collectively with concert parties holds more than 80 percent of the listed shares of a company, the stock exchange has the right to de-list such company. In fact the offeror has made it clear its intention to delist the Berger Shares.” The directors’ recommendation goes on to quote ACI statement that they will seek delisting if they acquire an additional 29 percent of the shares. “It is therefore clear that Berger Jamaica shares will in all probability be delisted from the JSE,” the directors’ statement concluded.
According to the directors, Ansa Coatings International controls 51.01 percent of the issued Berger Jamaica’s shares and as a result of this Offer, its holding will most likely exceed 75 percent.
It seems that for the recommendation to shareholders to be substantially based on the “highly likely that acceptance” taking the holdings of ACI beyond 80 percent and most likely exceed 75 percent, is highly flawed. Where did the directors get that information from and why did they not disclose the source in the recommendation. Why they did not think it appropriate to disclose the interim results figures up to August in the report?
At $10.88 per share, Berger is priced at 5 times the current years’ earnings against more than 13 for the main market, on what basis could it be regarded as a fair price?
The situation gets more curious and raises a huge question, is someone is trying to manipulate shareholders in giving away their shares at less than a fair price? That is the only conclusion to be arrived at, when without notice, the shares of Berger were without notice, suspended by the Jamaica Stock Exchange on Thursday, October 5, 2017 and is to remain suspended to Friday, October 13, 2017. According to a release late on Thursday, “this is to facilitate the processing of the transaction in respect to shareholders of the Company who have agreed to sell their shares to Asna Coating, as a part of their Takeover Bid of Berger.” That of course is a load of crap. Trading shares of Desnoes and Geddes a much bigger company was never suspended when Heineken acquired the minority shares in 2016, Hardware and Lumber shares were never suspended either, nor was Scotia Investments’ in Scotia Group’s recent acquisition of the minority shares. Why is there a need to prevent Berger shareholders who want to trade the shares if they so desire? Worse why is there need to suspend it beyond Monday?
The capital market cannot prosper as well as it should if the above abuses continue to take place without corrective action being taken. The Jamaica Stock Exchange and the Financial Services Commission should have intervened when the directors’ recommendation included information that was not backed up by facts and should have intervened and prevented the unwarranted suspension of trading in the company’s shares.

Berger buyout offer extended

Berger Paints is worth more than $20 per share.

Ansa Coatings International, the major shareholder in Berger Paints Jamaica, announced an extension of their offer to acquire minority shares in the company to October 9.
No other change has been made to the offer and no reasons have been given for the extension.
It may be that the circular containing the recommendation of the directors having just been released at the end of last week would not have given enough time for some shareholders to respond to the recommendations. It is also an indication that the majority of the shareholders are not buying into the price being offered. If they were it would be expected that the extension notice would have mentioned a high level of acceptance and so encourage others to do likewise.
Berger’s minority shareholders are being offered $10.88 for each share, but the price has been consistently above this price for most of 2017 while the value based on earnings and market valuation being in the $20 range.

It makes no sense

Berger Paints is worth more than $20 per share.

Berger Paints shares are worth more than $20 each, so why would any rational person recommend that shareholders sell them at $10.88? It simply makes no logical sense as the offer to buy is not a fair price for the minority shares.
Unfortunately, a number of small shareholders are likely to get their wealth sucked out by an awful and unfortunate recommendation by the directors of Berger Paints for them to accept an offer that is clearly not in the interest of minority shareholders.
According to the directors, Ansa Coatings International controls 51.01 percent of the issued Berger Jamaica’s shares and as a result of this Offer, its holding will most likely exceed 75%. That of course is not supported by facts and no evidence is put forth to support this view. What difference does this make anyhow? The vast majority of listed companies on the Jamaica Stock Exchange, are controlled by majority shareholders having more than 75 ownership without minority suffering unduly if at all. Why should that change now?
According to the directors, PwC Advisory has stated in the Fairness Opinion that the consideration under the offer is fair to the shareholders of BPJL from a financial point of view. PwC Advisory review procedures focused on evaluating the fairness of the offer on a stand-alone basis and not relative to the price attributed to other companies included in the LBOH Acquisition.
The circular does not reveal confirmation from any of the major minority shareholders that they intend to sell and thus take the holdings for the majority shareholder beyond 80%. The 80% threshold does not automatically translate to delisting. Argument is made about transfer tax and stamp duty for transferring shares if the company were to be delisted, but no mention is made that investors bought stocks in large quantities at prices that would make the cost of transfer fees an unimportant factor. The directors seem unaware of the regulation relating to delisting and it is not a simple as they state or would want investors to think.

New building in Montego Bay.

The reality is that even if the shares are to be delisted it will likely take months before that takes place.
An analysis who is not unconnected with a major minority shareholder, had this to say “Regarding Berger, the stock is controlled by about 4 to 5 minority shareholders who own roughly half (or a little more than) of the 48.99% remaining. I have it on very good authority that the parties have unanimously chosen to REJECT Ansa McAL’s offer.”
There are other smart investors who will not accept it as well, hence the chance of the offer doing well is slim, especially as the stock has been trading above the offer price. The above assessment mirrors IC earlier comments that 6 shareholders hold more than 31 percent of the shares and they are unlikely to sell at the offer price. That would make the possibility of the offer getting shares up to even 70 percent very slim. In addition there are others who won’t sell either.

20 South, Apartment complex currently under construction in Kingston.

New buildings going up in Jamaica to add to paint sales

The average PE of the main market is 13 times this year’s earnings so even if we used the March results, the shares are worth in excess of $19. Add to that, improved earnings to June and the value grows even higher.
Jamaica suffered from a long period of minimal economic performance and now seems to be on a path to sustainable growth, against this back ground there are several buildings under construction presently that will result in increased demand for paint. Berger is set to reap huge benefits from the increased demand and shareholders will too. Interest rates have been sliding and will continue to do so making stocks more attractive than is currently the case. PE ratios will rise and so will profits, a combination that should put Berger in the $40 region in a year’s time so why would anyone want to sell under $11. Investors should be buying around the current listed price of $11 to benefit from a huge upside after the offer fails.

Ansa’s Berger T&T holdings to hit 81%

Carib Beer brewed in Trinidad by Ansa McAl Group

Trinidad based conglomerate, ANSA McAL is set to acquire an additional 9.7 percent of Berger Paints in Trinidad. The acquisition if concluded, will give the group just under 81 percent of the company.
The group through subsidiary, ANSA Coatings International, through an International Business Company established in St Lucia, entered into a Share Purchase Agreement with Chan Ramlal Limited for the acquisition of 500,000 shares in Berger T&T, a release to the Trinidad & Tobago Stock Exchange stated. The ANSA McAL group already holds, 60,606 ordinary shares representing 1.17 percent in Berger.
On 16th June, 2017, ANSA McAL entered into a Share Purchase Agreement with Berger International Private for the acquisition of all of the 1,869,805 ordinary shares in Lewis Berger (Overseas Holdings). Lewis Berger owns 3,613,011 ordinary shares in Berger Trinidad, representing 70 percent of the shareholding, 100 percent of the 376,000 equity shares, of Berger Paints Barbados and 109,332,222 ordinary shares, representing 51 percent of the shareholding of Berger Paints Jamaica.