Of hostile takeovers, headlines, truth and fiction

The past fortnight has seen our nation’s newspapers, mass media and John Public speculating on a phantom takeover related to Supreme Ventures Limited (SVL). In what should have been a relatively straightforward series of events, unfortunate reporting created a maelstrom of opinions which were unfortunately, misguided.

Let us begin where we should, with the facts (in chronological order):

• October 9, 2017 – 306,999,685 units of SVL shares valued at JMD $2,916,497,007.50 – at the close of business on that day – traded on the Jamaica Stock Exchange.
• October 13, 2017 – Former Directors Nikolaos Nikolakopoulos and Georgios Sampson stepped down from the Board of SVL. a. They were later revealed to be representatives of former majority shareholders, Intralot Caribbean Ventures Limited (‘Intralot’).
• October 19, 2017 – A notice was posted on the JSE stating that SVL was in receipt of a requisition dated October 19, 2017, calling for an Extraordinary General Meeting, from:
  • Mayberry West Indies Limited (MWIL)
  • Bamboo Holdings Limited
  • Konrad Mark BerryWho collectively own in excess of 10% of the authorized share capital of SVL. Section 128 of the 2004 Companies Act of Jamaica states among other things:

  (1) The directors of a company, notwithstanding anything in its articles, shall, on the requisition of members of the company holding, at the date of the deposit of the requisition, not less than one-tenth of such of the paid-up capital of the company, as at the date of the deposit, which carries the right of voting at general meetings of the company, or, in the case of a company not having a share capital, members of the company representing not less than one-tenth of the total voting rights of all the members having at that date a right to vote at general meetings of the company, forthwith proceed duly to convene an extraordinary general meeting of the company.

  (2) The requisition shall state the objects of the meeting, and shall be signed by the requisitionists and deposited at the registered office of the company, and may consist of several documents in like form, each signed by one or more requisitionists.

  The explanation behind MWIL’s course of action stemmed from disappointment with the Board’s not filling the casual vacancies as per fact (2) above and to consider new shareholder and/or new representation on the Board.

• October 20, 2017 – An article with the headline “The SVL New Major Shareholder Seeking To Remove Seven Board Members” appeared in the Friday Gleaner
  a. These Board Members were:
  • Paul Hoo (Chairman)
  • Richard Foreman
  • John Graham
  • Steven Hudson
  • Ian Moore
  • James Morrison – outgoing CEO – who was acting in the capacity.

   

  b. Their proposed replacements were:
  • Christopher Berry
  • Gary Peart
  • Nicholas Mouttet
  • W. David McConnell
  • Peter McConnell
  • Ansel Howell
  • Lance Hylton

• October 21, 2017 – An article with the headline “Hostile Takeover? – Supreme Ventures Chairman calls Attorneys over move to oust Board” appeared in the Saturday Gleaner.
• October 23, 2017 – In a release to the Jamaica Stock Exchange, SVL advised that the Board of Directors approved the appointment of the following persons as Directors of the Company effective October 23, 2017:
  • Mr. Ansel Howell
  • Mr. Christopher Berry
  • Mr. Gary Peart
  • Mr. James Morrison stepped down from the Board.
• October 23, 2017 – At a Press Conference at the Liguanea Club, representatives of MWIL denied that a takeover was in the making and updated the media that the plans for an EGM were under review in light of the developments of which fact (6) above formed part.

Additional Facts – without a clear idea as to the date of occurrence

Intralot was acquired by Zodiac International Investments & Holdings Limited (‘Zodiac’) – for exact terms unknown to the public. – Zodiac is the new majority holder of SVL with shareholding of 38.32%.

Definitions

What is a Hostile Takeover?

Noted investment site Investopedia describes a hostile takeover as “A hostile takeover is the acquisition of one company (called the target company) by another (called the acquirer) that is accomplished by going directly to the company’s shareholders or fighting to replace management to get the acquisition approved.” According to this definition, the SVL matter would not qualify as a hostile takeover, nor as a takeover. In fact, one of the more recent instances of an attempted hostile takeover would be Black Sand Acquisition’s pursuit of Lascelles deMercado – makers of the iconic Wray & Nephew Overproof Rum. Additional information can be found here.

Takeovers and Mergers

‘JSE Rule Appendix 1 (19) – Takeover and Merger’ under the heading of ‘Mandatory Offer’ is quite clear on Takeovers, namely – “A mandatory offer must be made to other shareholders of the same class when, any person acquires, whether by a series of transactions over a period of time or not, shares which (taken together with shares held or acquired by person acting in concert with him) carry 50% of more of the voting rights of a company or control of the company.” Considering that Mayberry West Indies owns 10% – 11% of SVL, was there a potential takeover, hostile or mandatory, at play? No. In fact, were one to review the history of the MWIL and past transactions, they have regularly taken Board seats on their portfolio investments. Examples are – Blue Power Group Limited, IronRock Insurance Limited, Lasco Financial Services Limited, Caribbean Producers Jamaica Limited, and formerly, Access Financial Services Limited. With JSE stakeholders having seen firsthand how the incorrect usage of a single term by the media can disrupt the lives of many, the use of caution is encouraged in the description of corporate activities. The effects are far-reaching. Regrettably, we were just here with Berger Paints and believe that due care should to be applied to prevent recurrences.