Jul 2008 Financial News

Angostura throws Jamaican economy a lifeline

Jul 04, 2008

The decision by Trinidadian company Angostura last week to pay the second tranche of US$326 million for an 86.6 per cent stake in Lascelles de Mercado comes as a timely shot in the arm for the Jamaican economy.

Rocked on its heels by a dearth of US dollars, the seemingly inexorable rise of inflation, oil prices skyrocketing, business confidence now at a new low, a panacea of sorts was needed. The Bank of Jamaica last week proffered relief when it decided to increase interest rates by 50 basis points across all tenors.

Angostura's decision to prepay the deferred (US$4.75) portion of the offer price by July 28th, 2008 to all Lascelles shareholders on record comes as a most welcome fillip not to just to the Ministry of Finance but all of corporate Jamaica, as the Caribbean's largest deal, representing less than 10 per cent of Jamaica's total GDP, nears completion.

This second tranche sees Angostura paying shareholders a total of US$635 million for 86.6 per cent of the Jamaican conglomerate, which now means it has acquired the voting rights of Calla Lilly.


Appleton Rum
Calla Lilly is the corporate vehicle used by Lascelles' Managing director, William McConnell and the group's chairman George Ashenheim to hold not only the 9,515 million ordinary shares, but also crucially the 15 per cent preference shares. When Calla Lilly's shares are combined with the 4,972 Lascelles 6 per cent preference shares held by Snowdown, the shareholdings represent voting rights of 60,919 which at 50.76 per cent of the voting rights is voting control of Lascelles. This controlling block will now be transferred to Angostura on it makes this final payment. The Calla Lilly - held shares, when the basis of the US$10.65 offer price which Angostura floated for Lascelles' ordinary stocks, would be worth over US$100 million.

According to the Directors Circular, "Calla Lilly has agreed to bestow all economic benefits associated with the ordinary shareholdings in Lascelles upon the remaining shareholders of the company."

Speaking with Caribbean Business Report earlier this week from Port-of-Spain, Trinidad, Executive Director of Angostura, Michael Carballo said: "It was always our intention to pay out as soon as was possible and not wait until 2011 as agreed. If we had waited until that period the deal would have worked out at US$10.65 a share. It is now US$9.25 a share as a result of us paying up earlier. This now means that we can concentrate on creating synergies between the two companies and focus upon the international growth of all our export related brands. We are looking to build shareholder value."

It is often asked what will Angostura do with its minor subsidiaries such as John Crook, Lascelles Merchandise Limited and Ajas Limited. Many think it would be better to dispose of them and distribute the proceeds as dividends to Lascelles' shareholders.

"It is far too early to announce that we will be selling off minor subsidiaries. Globe Insurance is a prized asset and we have plans to cross- list it in the region before going on to the London Stock Exchange.

"What I can tell you is that Billy Mc Connell will remain at the helm with the same management team. The aim is to create a mega Caribbean group," said Carballo.

Angostura itself is a subsidiary of Trinidadian conglomerate Clico Financial which is run by Lawrence Duprey.
Duprey has called on Lascelles shareholders to hold on the equity in the Jamaican conglomerate because the share price is set to continually go up.

"Let me give you our word -I will guarantee this - if you stay in, the rate of the returns you would be getting would be higher than any other stock on the stock exchange, either here or in Trinidad. And it follows, because we are going to market globally. We have a strong product. We are good producers, " said Duprey at a luncheon ceremony at the Jamaica Pegasus earlier this year.

Speaking with Caribbean Business Report yesterday, vice president of corporate client services at NCB Capital Markets Vernon James said: "This US$326 million from Angostura will undoubtedly help to reduce the slippage of the Jamaican dollar. Mind you, much of that may go offshore with investors looking for better returns, but on the flip side many may want to take advantage of the higher interest rates resulting in a conversion back into Jamaican dollars."

James further added that some of the large investors in Lascelles are pension funds who with this windfall may well be looking to invest in the region's equities markets.

"From an investment standpoint, we may well see more issues come onto the market due to the liquidity generated by the sale of both Lascelles and RBTT. Measures by corporate entities to mop up this liquidity by bong issues intended for expansion purposes will have a positive impact for the long term. From a regional perspective, institutional investors may use this Angostura windfall to reduce debt or pursue acquisitions.

What this deal does is open the eyes of the international market to the value of Jamaican brands."

Jamaica Observer
Website:http://www.jamaicaobserver.com/magazines/Business/html/20080703T220000-0500_137439_OBS_ANGOSTURA_THROWS_JAMAICAN_ECONOMY_A_LIFELINE.asp
July 4, 2008