Is Angostura for sale?

On September 10, 2008, Michael Carballo, the former financial director of the CL Financial group, wrote a private and confidential report to then CL Financial chairman, Lawrence Duprey, with copies sent to Andre Monteil, Gita Sakal, Geoffrey Leid and Karen-Ann Gardier.

That report, whose subject line was a proposed merger of Lascelles deMercado and Angostura Holdings Ltd, was written six weeks after the July 28, 2008 completion of the acquisition by CL Financial of Lascelles de Mercado for a cost of US$680 million, of which US$495 million or 73 per cent came from debt financing. Some 69 per cent of the debt financing came from a Citibank/NCBJ package, which Carballo proposed CL Financial should seek to get released as early as possible to allow Clico and Clico Investment Bank direct ownership over Lascelles.

While the subject of the private and confidential report was labelled a merger, what Carballo proposed was having Lascelles make an all-cash offer for 100 per cent of Angostura at a price of US$1.25 per share (about $8 a share).

This means that the 2008 valuation placed by a top executive of CL Financial on 100 per cent of Angostura, a company whose history in T&T goes back to 1875 and which possesses one of the country’s few world-renowned brand, was US$258 million ($1.66 billion). 

The CL Financial executive proposed that his group, which owns about 78 per cent of Angostura, would be allocated US$201 million, while the minority shareholders would receive US$57 million. Alternatively, he proposed that it would be “more efficient for CL Financial to assign US$201 million of the current US$495 million debt directly to Lascelles deMercado.”

According to Carballo, on receipt of the offer, Lascelles and Angostura were to notify the local Securities and Exchange Commission and Stock Exchange of it. CL Financial would then “immediately accept” the offer and then Angostura would advise the 1,800 plus minority shareholders that the offer was fair and that the recommendation would be to accept.

The proposal envisaged the de-listing of Angostura and the cross-listing of Lascelles on the local stock market.

According to information on the T&T Stock Exchange, the issued share capital of Angostura Holdings Ltd is 206,277,630 shares. Angostura’s 2011 annual report indicates that a company called Rumpro Company Ltd, which is believed to be owned by CL Financial, owns 92,551,212 shares in Angostura, which is equal to 44.87 per cent of the rum and bitters producer. Clico, owns 66,971,877 shares in Angostura, which means that the financially strapped insurance company owns a 32.46 per cent stake in the Laventille-based company.

After assigning US$201 million of CL Financial US$495 million debt from the acquisition of Lascelles to the Jamaican conglomerate, Carballo proposed that CL Financial should sell down 17 million Lascelles shares at US$10 a share, raising US$170 million, which would further reduce the T&T conglomerate’s net debt residual by US$170 million to US$124 million. 

The sell-down of the Lascelles shares would have reduced the T&T conglomerate’s stake in the Jamaican company from 86.7 per cent to 69 per cent, while still maintaining voting control at 83 per cent.

The former CL Financial excutive, envisaged that the timetable for the acquisition of Angostura by Lascelles could have started on September 19 and ended on November 22, 2008 with the Angostura shareholders receiving the payment for selling their shares.

One of the four “clear advantages” identified by Carballo in his proposal was that “there is no major impact on the utilization of cash and other short-term resources of Lascelles and the group can continue to operate on a very liquid basis.” (Clearly, on September 10, 2008, liquidity was already a concern for CL Financial, as anyone who has been paying attention to the Commission of Enquiry knows).

There is much in Carballo’s private and confidential internal memo to other senior executives of CL Financial that is worthy of commenting on. While withholding comment on the proposal for now, during the pendency of the Commission of Enquiry, suffice it to say that I find the proposal to palm off CL Financial’s debt from the acquisition of Lascelles on the Jamaican company itself to be very interesting. I also think it is very noteworthy that there was an assumption within CL Financial that the regulators in Jamaica and T&T and the minority shareholders of both Lascelles and Angostura would not have had any problem accepting this proposal.

I have been thinking about the ideas in the memo for some time now in the context of:

• The Campari acquisition of the alcohol assets of Lascelles deMercado in December last year for US$410 million;

• The fact that Minister of Finance Larry Howai identified during his October 1 budget speech that the cost to the State of the CL Financial bailout would be $19.7 billion;

• The fact that the latest extension of the June 2009 shareholders’ agreement between the Government and the shareholders of CL Financial expires at the end of May with no news from the Government that the State has made an official claim on CL Financial for the $19.7 billion. At the annual meeting of Angostura on April 27, CL Financial chairman Gerald Yetming, in answering questions from a shareholder, said that the Government will be making a claim on CL Financial to recover the billions of dollars that the conglomerate has received from the State since the signing of the Memorandum of Understanding on January 30, 2009;

• The fact that there has been no announcement from the Government or from CL Financial chairman Gerry Yetming on the sale of assets of the conglomerate in order to begin to repay the huge debt that CL Financial owes the taxpayers of T&T. Yetming is chairman of Clico, CL Financial and Angostura and sits on the boards of MHTL and Home Construction Ltd;

• There has been no definitive word from the Government on the future of Clico, of which 49 per cent is owed by the State;

• There has been no definitive word on the arbitration proceedings between the Government and the minority shareholders of Methanol Holdings (Trinidad) Ltd, which took place in London in May last year; and

• There has been no word whatsoever, either definitive or otherwise, of the Government’s plans for Angostura.

As someone with a personal, financial interest in Angostura, I am very interested in finding out—as I am sure are the 1,800 plus minority shareholders—whether the Government intends to attempt to sell the 78 per cent of Angostura held by CL Financial and Clico before the May deadline of the shareholders’ agreement or if the company reverts to CL Financial when the agreement finally expires.

The complication is that the shareholders’ of CL Financial own 100 per cent of the conglomerate but CL Financial itself only owns 51 per cent of Clico with the Government being the 49 per cent minority shareholder.

Can the Government provide some clarity?

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