Court fixes fair price for TCL's Readymix shares

A MAJOR victory for minority shareholders of companies was won in the courts on Friday as one such shareholder challenged a share offer by local cement manufacturer Trinidad Cement Ltd (TCL) in the company’s takeover bid for Readymix (West Indies) Ltd (RML).

However, the court’s ruling on the RML’s fair-value share price will apply only to minority shareholder Peter Permell.

TCL filed the claim asking the court to fix the fair value of Permell’s shares. It made the application after Permell exercised his right to demand that TCL, the majority shareholder in Readymix, acquire his shares, but disagreed with the price the company offered him. He argued that $11 was not a fair value for each of his then 31,781 shares.

TCL contended that a fair value for the Readymix shares was $11, or US$1.62 per share.

On Friday, Justice Eleanor Donaldson-Honeywell fixed Permell’s fair-value share price at $13.42 per share, based on the recommendation of an independent court-appointed valuator.

In the March 2017 take-over bid, in which TCL became the 90 per cent shareholder in Readymix, the company offered the 495 minority shareholders $11 per share.

The takeover bid closed in May 2017, and was accepted by 53 of the company’s shareholders, which included Clico, RBC Trust, JMMB Investments, Tatil Life Assurance, Unit Trust Corporation, Clico Investment Bank and Republic Bank.

TCL acquired half the shares of all minority shareholders, a further 1,577,207 of the 12 million Readymix shares, and, in a mop-up period, acquired more, resulting in a 90 per cent shareholding.

At this point the mandatory provisions of the company’s by-laws became relevant as the remaining Readymix shareholders, including Permell, were entitled to have TCL acquire their shares.

Under by-law 26(4), in the event a shareholder wanted TCL to acquire their shares, they had to provide TCL with notice and choose between receiving the offerprice or a fair value fixed by the court.

Fifty shareholders wanted TCL to acquire their shares, and of that number 49 elected to receive the offer price.

Permell asked that TCL purchase his at a fair value fixed by the court and in accordance with the by-law, TCL was required to apply to the court to fix the fair value and did so.

In her decision, the judge held that the appropriate date at which the fair value should be fixed was August 29, 2017, which was after the date Permell gave formal notice to have by-laws invoked and have the court fix the fair value for his shares.

Permell was not successful in having the court order that he should receive interest on his share value, as Donaldson-Honeywell pointed out there is no legislation providing for the award of interest, so she did not have statutory jurisdiction to make such an order.

TCL was also ordered to pay 75 per cent of Permell’s legal costs, since it succeeded in the award-of-interest argument.

Permell’s attorneys were Ronnie Bissessar and Varin Gopaul-Gosine. TCL was represented by Catherine Ramnarine and Miguel Vasquez.

In an earlier ruling, in which she ordered TCL to pay the cost of hiring the independent appraiser to assist in fixing a fair-value price, the judge said it was Permell’s statutory right and entitlement to reject the share price offered to him and that it was “clear that there is an intention to protect the investing public.”

She also said TCL had not provided any evidential basis on which Permell should have simply accepted the share offer of $11 because many institutional investors accepted it as fair value.