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Monday 24 September 2018
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Commentary

No deal on GHL with Jamaicans

P.S. Moralles

It is with great interest that I read the “good” news of the takeover bid of Guardian Holdings Ltd (GHL) by Jamaica’s NCB Financial Group and anxiously await the opinion of the board of directors on this sensitive and serious national matter.

I disagreed entirely with the sale some years ago of Royal Bank of Trinidad and Tobago, a national jewel for several reasons, the two most important ones being:

First that such a sale would negatively result in the expatriation of profits in US dollars because at the time there was no exchange control regulations. It was dire bad business for the country.

The second reason was the continuing demise of the local stock market which afforded citizens the opportunity to share in big business and the growing wealth of the country, which was the TT Stock Exchange’s (TTSE) originally designed purpose.

It appears that the next head on the block will be GHL and I must forewarn shareholders that after majority control the next step by the Jamaicans will most likely become total ownership of this national jewel by invocation of the takeover code where, no matter how you might personally feel, your share will be forcefully bought and taken away from you at “their” price, as happened with the Flavorite and Furness companies etc.

The fact is that shareholders were recommended by the then GHL board of directors to buy more shares in the rights issue some years ago, at $40 a share and then afterwards the price of the share fell slowly and surely to an all-time low of about $12 at one time, almost a 75 per cent loss of value.

The $40 a share valuation was also approved by the Ministry of Finance and so I must ask: How come?

For some unexplainable reason, the GHL share has been trading at ridiculously low values with a feeble price earnings multiple of eight to nine times on the TTSE and this suggests there may be some unknown force or forces behind this and made possible because of the small size of the market, which easily induces manipulation by smartees.

A more reasonable price/earnings ratio for GHL should be around at least 15 times for such a quality company, which means that the price should not be less than $26 based on approximate earnings per share of $1.70. And on top of this a premium should be offered to induce shareholders to sell.

A fair price should therefore be twice as much as was offered by NCB at $15.72 (imagine that, the audacity) or around $30. It should also be noted that the net book value of a GHL share is $14 and so the offer amounts to almost “at book cost,” which is simply unjust.

By offering to buy the shares in US dollars at a time when US currency is virtually impossible to obtain, it is an inducement which many shareholders will fall for but in the final analysis this will become a situation of being penny wise and pound foolish and whether you love your country and your children or not.

My advice is “no deal” and if NBC has to pay it must be nothing less than $32 per share. Please, no half-baked price of US$2.35 (TT$15.95), which is unfair — and while the share presently trades higher at $17.22.

Our country must inform Michael Lee-Chin and his NCB brand to go elsewhere for takeovers, that we have national pride and patriotism in our arteries. For the Jamaicans, 29.9 per cent of GHL is already more than enough and so I wait to see what the directors will say and whether patriotism is an absent word in their dictionary as well.

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