Contributed
William McConnell (centre), managing director of Lascelles deMercado and Company Limited, and Michael Carballa, executive director, company secretary and treasurer for Angostura Holdings Limited, shake hands Friday at the announcement of Angostura's bid for 49.24 per cent of equity in Lascelles, Mona Visitors' Lodge, University of the West Indies. Looking on is Bruce Levy of Myers Fletcher and Gordon, attorneys for Angostura.

Lavern Clarke, Business Editor

The Angostura Holdings two-tier bid for an equity stake in the highly profitable conglomerate Lascelles deMercado values the blue-chip company on a per share basis at US$1.02 billion or J$73 billion at Friday's spot prices, putting a 57 per cent premium on its current stock market value.

But the offer itself for 49.24 per cent of voting rights in Lascelles is priced at about US$921 million, making it the second-largest deal in the Caribbean this year - eclipsed by the US$2.2 billion Royal Bank of Canada/RBTT deal - and the largest among two home-grown Caribbean companies.

The offer of US$10.65 (J$760.40) per ordinary share by the Trinidad based liquor and spirits company, if accepted, is to be paid in two traunches over a three-year period, with more than half the proceeds to flow at the bottom end or final consummation of the deal in 2011.

Bigger global player

Strategically, Angostura wants to become a bigger global player in the beverage industry and sees Lascelles as a complementary fit, while Lascelles is similarly hunting new overseas markets for its top brands.

The two hope to consolidate 'all drinks interests' and seek a common listing on the London Stock Exchange (LSE), with the deal extending to the possibility of a merger involving Wray and Nephew Limited, and down the line, the likely creation of a new company as the LSE listing target, Angostura executive director, company secretary and treasurer Michael Carballo said Saturday in discussions with Sunday Business.

Angostura's spirits assets are valued at US$500 million, but the group to which it belongs commands spirit assets of a combined US$1 billion, Carballo said.

"We will also be exploring opportunities for possible listings of both Wray and Nephew Limited and Globe Insurance Limited, along with a possible merger with the Angostura Group, with the aim of a cross-listing on the exchanges in both Trinidad and Tobago and Jamaica," said Angostura Holdings in a forward-looking statement.

Both Wray and Nephew and Globe are 100 per cent owned by Lascelles.

"We think that this opportunity to make a bid for Lascelles allows us to marry the two organisations and become more competitive on the global market," added Carballo, in an earlier interview Friday. "There is an inherent value in Lascelles the brand, and by bringing the two companies together, there will be a number of opportunities for mergers between Wray and Nephew and Angostura, and so we see tremendous value going forward."

Angostura Limited, a wholly owned subsidiary of Angostura Holdings Limited, is offering US$4.50 per share to Lascelles stockholders payable January 31, while the deferred portion, US$6.15 per share, will be paid January 11, 2011.

Angostura is also bidding US$0.30 for 5,028 of Lascelles' 6 per cent non-redeemable preference shares - just over half the 10,000 issued - with two thirds of the payment to be made upfront and one third in 2011.

Holders of Lascelles' stock are allowed one vote per preference unit held, and one vote per 1,600 ordinary units.

'Discount schedule'

The Trinidad company, whose name is most commonly associated in Jamaica with its bitters, says it retains the right to pay the deferred portion on a 'discount schedule', the implication of which is that shareholders could end up with returns below the full offer price.

"This could mean," said the company, "that the deferred payment received is less than US$6.15 but not less than US$4.50 per share." On Saturday, Angostura executives said the offer price may end up as low as US$9, which would revalue the offer at around US$780 million.

Angostura's bid document is expected to provide more details of the share ownership distribution in Lascelles. Carballo told Sunday Business that Angostura and its associated company Clico already control about 5.0 per cent of Lascelles.

Lascelles sad it would make a recommendation to shareholders after its board considers the offer circular, due out this week.

But, the joint press conference with McConnell and Carballo suggests that, barring any surprises, the Lascelles board will likely recommend acceptance of the offer, with McConnell already saying Angostura's bid was a serious offer from "a highly credible bidder."

Both McConnell's and chairman George Ashenheim's holdings in Lascelles - the two control two companies which have 50.76 per cent voting rights - are exempted from the offer, the parties said.

Lascelles, which to Friday had 96 million issued stock units, last traded on the Jamaica Stock Exchange at $475 per share, up $26.50 or 6.0 per cent in a day and driving the market higher as word of the deal spread, to set a third record high for the stock in a week of trading, and pushing its market capitalisation to $46.5 billion.

On Friday, more than 9.7 million or 10.2 per cent of Lascelles shares changed owners.

"Lascelles deMercado is a company that we have been looking at for a very long time," Carballo told Sunday Business. "It has tremendous value and we feel that because we are already a rum producer and a global competitor, all the assets and segments of Lascelles fit nicely into the Angostura financial group."

Both companies are into rums, with Lascelles' jewel being Wray and Nephew Limited, whose business dates back some 250 years, while Angostura's goes back 173 years to 1824.

Angostura's ultimate parent is CL Financial Limited, a diversified group with assets of US$14 billion operating in real estate, financial services, banking, insurance, spirits and energy sectors. It is a top trader of methanol.

Group with assets

Angostura Holdings, a listed company, is itself a TT$3.5 billion (J$38 billion) company by assets, in the business of rums, scotch whisky, cognac and aromatic bitters.

Lascelles, which is in the business of rums, wines and beer, also has interests spanning insurance, automotives, merchandising and transportation, in companies that are all fully owned. At last audited balance sheet date, the conglomerate had net assets of $27.7 billion (US$388.5 million, TT$2.6 billion).

Last year, the two companies reported combined revenues of $26 billion (TT$2.4 billion), but Angostura Holding's portion of TT683 million represented depressed turnover by 43 per cent relative to 2005 earnings, following its disposal of interest in a subsidiary.

Angostura said Friday its bid was not a takeover, suggesting that top shareholders McConnell and Ashenheim were likely to remain in control of the company whose profits have been on a three-year streak, reaching $2.5 billion in 2006.

The maximum amount of ordinary shares that will be subject to the bid is 86,484,020 units, less the shares already owned by both Angostura Limited and related company Clico.

The offer opens November 30 and closes January 14, with payment on the take-up expected to be made two weeks later.

Shareholders may specify currency of payment in either Jamaican or U.S. dollars.

The assigned local broker on the deal is Mayberry Investments Limited.

lavern.clarke@gleanerjm.com

Lascelles deMercado and Company Top 10 shareholders 2006