The Trinidad Ce­ment Lim­it­ed (TCL) board has rec­om­mend­ed that share­hold­ers of the Clax­ton Bay-head­quar­tered re­gion­al ce­ment pro­duc­er should re­ject the $4.50 per share takeover bid by Mex­i­can ce­ment gi­ant Ce­mex.

In a di­rec­tors' cir­cu­lar is­sued yes­ter­day, the board said the of­fer price does not re­flect the "full com­mer­cial val­ue of TCL."

The TCL board de­ter­mined that the shares of the com­pa­ny have a greater val­ue than the of­fer price of $4.50, which it said was "not fair, from a fi­nan­cial point of view, to the share­hold­ers."

The di­rec­tors' cir­cu­lar did not say what a fair price would be. They did, how­ev­er, ad­vise share­hold­ers that TCL is poised to ben­e­fit from the sig­nif­i­cant op­er­a­tional im­prove­ments in­sti­tut­ed in Au­gust 2014.

"The com­pa­ny has ex­pe­ri­enced a turn­around af­ter mul­ti­ple past ef­forts to do so. The ev­i­dence of the turn­around is sup­port­ed by the com­pa­ny's re­turn to sus­tain­able prof­itabil­i­ty in 2015 and con­tin­u­ing to pro­duce pos­i­tive net in­come through­out 2016.

"The board has em­barked on a num­ber of op­er­a­tional and cor­po­rate re­struc­tur­ing ini­tia­tives that con­tin­ue to gen­er­ate pos­i­tive val­ue for the com­pa­ny."

The di­rec­tors al­so re­ferred to a val­u­a­tion analy­sis of TCL's shares done by Price­wa­ter­house­C­oop­er (PwC) in Jan­u­ary 2015 ahead of a pro­posed rights is­sue in March of that year. The PwC analy­sis, which took in­to ac­count the TCL's dis­count­ed cash flow, earn­ings be­fore in­come tax de­pre­ci­a­tion and amor­ti­sa­tion (EBIT­DA), net as­set val­ue, mar­ket his­to­ry and con­sid­er­a­tions and the trad­ing his­to­ry, placed the share val­ue be­tween a low of $3.30 and a high of $3.80.

The TCL di­rec­tors al­so point­ed out that Ce­mex is on­ly of­fer­ing to ac­quire up to 74.9 per cent of the is­sued shares of the com­pa­ny. One con­di­tion of the bid is that any shares in ex­cess of that lim­it will be tak­en and paid for on a pro ra­ta ba­sis.

"In those cir­cum­stances, the re­main­ing 25.1 per cent share­hold­ers may find that their share­hold­ing has been de­plet­ed, and the board needs to con­sid­er the fu­ture of the com­pa­ny as it re­lates to the sig­nif­i­cant num­ber of mi­nor­i­ty share­hold­ers who will re­main with a de­plet­ed mi­nor­i­ty share­hold­ing," the board said.

On De­cem­ber 6, Ce­mex, through one of its in­di­rect sub­sidiaries Sier­ra Trad­ing, an­nounced plans to ac­quire 132,616,942 TCL shares at a price of $4.50 in cash per share.

The bid, if suc­cess­ful, would re­sult in Sier­ra hold­ing up to 74.9 per cent of the eq­ui­ty share cap­i­tal in TCL. Full ac­cep­tance of the of­fer would re­sult in a cash pay­ment by Sier­ra of ap­prox­i­mate­ly $597 mil­lion (US$89 mil­lion).

Sier­ra's ex­ist­ing share own­er­ship in TCL is ap­prox­i­mate­ly 39.5 per cent. The of­fer ex­pires at 3 pm on Jan­u­ary 10. In com­ing to the de­ci­sion to re­ject the Ce­mex of­fer, the TCL board said it re­lied heav­i­ly on the Fair­ness Opin­ion con­duct­ed by EY.