On December 10, Campari Espana SL, a wholly-owned subsidiary of Davide Campari-Milano SpA, closed its take-over offer for CL Financial (CLF) subsidiary, Lascelles de Mercado.
Campari offered to purchase all of Lascelles shares, at US$4.32 per ordinary share and US$0.57 per preference share. The offer opened on November 9 and was originally scheduled to close on November 30, 2012. The purchase price represents more than a 38 per cent premium on the closing price as at the end of August 2012.
In a September 8, 2012, news article CLF chairman Gerald Yetming is reported to have said that "the total cash proceeds per ordinary share for 100 per cent of LdM, including all estimated pre-closing extraordinary dividends, is expected to be approximately US$546 million or US$5.69 per ordinary share, subject to various closing adjustments in the agreement and actual proceeds of non-core assets."
The CLF chairman is also reported to have confirmed that three state entities, the Unit Trust Corporation (UTC), the National Insurance Board (NIB) and First Citizens bank, will be beneficiaries of the multi-million dollar sale since they are all noteholders. The principal outstanding on the note, which was borrowed in 2008 by CLF to buy Lascelles, is US$342 million.
The amount that CLF will receive from the sale of its 81.4 per cent shareholding is US$338 million. The chairman is also reported to have said the noteholders will be repaid. They've lent money to CLF and repeatedly could not get paid.
The consequences of not paying them back meant CLF could have lost the company for US$342 million. This is because the underlying security of these notes is the Lacelles shares. However, he was silent on when the noteholders would be repaid and by whom.
Supporting shareholders:
CL Spirits Ltd
In reviewing the offer document, a few things "jumped" out at me as follows:
Campari's obligation to consummate the offer is subject to the removal of all liens from all Lascelles shares owned by the supporting shareholders, the approval of a pledge of certain shares of Angostura Holdings Ltd (Angostura), and the receipt by Campari of certain legal opinions from counsel to the supporting shareholders.
The supporting shareholders are defined as CL Spirits Ltd, Calla Lilly Holdings Ltd and Snowdown (2007) Ltd, all wholly-owned subsidiaries of CLF, that collectively hold approximately 81.4 per cent of the ordinary shares and 97 per cent of the preferred shares of Lascelles.
Their primary obligation is to accept the offer subject to certain conditions outlined in a stock purchase agreement (SPA) previously announced on September 3, 2012, between the CLF subsidiaries and Campari.
One of the terms of the stock purchaser's agreement as agreed to by Government-controlled CLF requires it to pledge its Angostura shares to Campari as a means of indemnifying the Italian purchaser.
The majority shareholders of Angostura are CLF and Clico, with CLF owning 92.5 million shares or 44.9 per cent of the company, through a holding company named Rumpro.
Clico owns 66.9 million Angostura shares or 32.4 per cent of the rum and bitters producer. CLF and Clico, therefore, collectively own a total of 159.4 million shares, bringing their combined stake in Angostura to 77.3 per cent. This means the total combined value of the CLF and Clico's ownership position in Angostura as at last Monday was $1.43 billion.
The document states that on or before the closing of the offer, December 10, a deed of charge is to be signed by and among Rumpro Company Ltd, Campari and the supporting shareholders creating a lien over Rumpro's stake in Angostura, which is worth $832.5 million or US$130 million.
In accordance with the deed, the supporting shareholders (all of which are controlled by the Government through CLF) will deposit or otherwise pledge shares of Angostura as partial security for their indemnification obligations to Campari in accordance with the stock purchase agreement. Accordingly, the supporting shareholders will have the payment for their Lascelles Shares held pursuant to the deed of charge.
Prior to or at the close of the offer, Lascelles may distribute in cash to its shareholders (i) related to its core business, in excess of "specified amounts," (ii) its working capital in excess of "specified amounts," and, (iii) an additional amount of US$245,800.
Following the close of the offer, if such amounts in aggregate are greater than the "specified amounts," Campari shall release to the supporting shareholders an appropriate number of the shares of Angostura then held in escrow. However, if such amounts in aggregate are less than those determined prior to the close of the offer, a foreclosure event shall be deemed to have taken place with respect to the appropriate number of the Angostura shares then held in escrow.
After the closing, the supporting shareholders shall indemnify Campari and certain related persons for, among other things, any liability relating to title to or encumbrances on the Lascelles shares owned by the supporting shareholders, and any such liability for any indemnifiable loss shall not exceed 81.4 per cent of such loss.
At or prior to the closing of the offer, Campari shall receive, among other things, releases with respect to all liens on the Lascelles shares owned by the supporting shareholders and releases from the supporting shareholders of all claims against Lascelles, its subsidiaries and Campari with respect to facts and circumstances occurring at any time on or prior to the closing of the offer in any way related to the business purchased by Campari.
The closing of the offer, shall take place after the satisfaction of or waiver of all conditions to the offer and in the stock purchase agreement in order to permit the closing of the purchase of the Lascelles shares owned by the supporting shareholders no later than December 31, 2012.
The offer price for any Lascelles shares purchased in the offer shall be paid within 14 days after the closing date.
The supporting shareholders have agreed to deliver to purchaser at the closing of the offer letters of resignation from members of the Lascelles board, and to procure a resolution of the Lascelles board appointing persons identified by purchaser to the Lascelles board, effective as of the closing of the offer.
The stock purchase agreement may be terminated, among other reasons, by either the supporting shareholders or purchaser if the closing shall not have occurred before 11:59 pm on December 31, 2012.
Questions needing answers
Now that the offer has closed, the Lascelles board including its chairman has resigned and a new board appointed by Campari effective December 10, 2012, the following questions arise:
Why was it necessary for the Government-controlled supporting shareholders to agree to an arrangement that creates a situation in which 44.9 per cent of Angostura shares have now been put at risk of being foreclosed when all that was required is for GORTT to settle the noteholders was to arrange for the proceeds of the sale of the shares to be assigned directly to each noteholder in proportion to the amount owed?
Has CLF received full or partial payment in for its Lascelles shares? Has CLF paid in full both the Trinidad and Jamaica noteholders, if not why not; and how much money has CLF paid and to each group of noteholders?
Are any Lascelles shares still encumbered, if so what is the value of those shares and the encumbrance, why is this so and are those shares are at risk of being foreclosed?
It should be noted that if Campari forecloses on Rumpro's 44.9 per cent shareholding in Angostura for whatever reason, whether real or contrived, the Italians would not only have indirectly acquired 44.9 per cent of Angostura, but would also trigger the Securities Industry Take-over By-laws in T&T.
As a consequence, Campari would have to make a formal offer to the Angostura minority shareholders to buyout their shares.
On behalf of Angostura minority shareholders, I shall be grateful if Yetming, in his capacity as the chairman of CLF, Laselles (up until December 10), Angostura and Clico, would clear the air on this matter.
Peter Permell
Angostura shareholder