NCB, GHL must ‘sort out’ share deal

Finance Minister Colm Imbert has no problem granting the requisite approvals for the Jamaica-based conglomerate, National Commercial Bank’s (NCB) proposed takeover of Guardian Holdings Ltd, so long as the parties sort out a share payment and transfer issue that the ministry’s outside counsel has determined to be in contravention of the Foreign Investment Act.

“The real problem is an arrangement for the purchase of a significant amount of shares — US$45 million worth. Based on information we have, NCB does not appear to have sufficient cash at hand to purchase all of these shares (according to its) bid and buy circular. So, an arrangement has been made between two shareholders, Universal Investments and Associated Brands Investments,” Imbert said on Friday.

These entities will transfers their shares to NCB as a type of loan, where instead of being paid immediately, they will be paid in three years with 6.5 per cent interest. This type of arrangement was not stated in the offer circular and the ministry’s lawyers have advised that such a transaction is in breach of section ten of the Foreign Investment Act.

“I only got this information (Thursday) morning. We have been advised that we should insist that the shares are paid for at the same time that ownership is transferred from the local shareholders to NCB,” he said. Once the company can work out a system where Universal and Associated’s shareholders can be paid at the same time as everyone else, the ministry will have no problem with granting approval.

The Foreign Investment Act requires that the money be paid either by a bank or other licensed foreign exchange dealer or from the retained earnings of a TT company. The issue isn’t the loan, Imbert said, but that payment take place at the same time ownership is transferred.

Among the directors for both Universal and Associated Brands are members of the Lok Jack and Ahamad family, who had previously sold their 29.99 per cent of shareholding in GHL at a preferred price to NCB’s chairman, Michael Lee Chin. This caused a furore among minority shareholders, leading the TT Securities and Exchange Commission to investigate the transaction. Eventually the matter was settled, GHL paid a $300,000 administrative fine and NCB raised its offer bid to minority shareholders to one more in line with what was offered to GHL’s majority shareholders.

The company hopes to acquire up to 74,230,750 ordinary shares in GHL for US$2.79 per share, or about US$207 million. If successful, NCB will acquire up to 32.01 per cent shareholding in GHL. When combined with NCB's existing 29.99 per cent shareholding in GHL, the company will have an overall 62 per cent controlling interest in GHL.

The other problem holding up the ministry’s approval is determining the ownership of NCB. If it is a wholly-owned Jamaican or otherwise Caribbean company then it should be exempt from the foreign investor licence under the rules of the Caribbean Single Market Economy. However, Imbert noted, when the ownership is traced back, it turns out that actual the ownership of NCB is controlled by Portland Holdings Ltd, registered in Canada. Lee Chin is the chairman and CEO of Portland. Because of that, NCB, and all its subsidiaries as necessary, will be required to apply for a foreign investor licence.

“There’s no problem with that and no problem within the Ministry of Finance granting a foreign investor licence to NCB just because it’s owned by a foreign entity. That’s not a problem. We just needed to settle that fact that it is under the control of foreign entities and therefore requires a licence,” Imbert said.