Notes From The Margin

April 8, 2008

Somehow We’re Not Convinced!

Filed under: Banking,Barbados,Capitalism,Caribbean,Economy,Globalisation,Media,mergers — notesfromthemargin @ 6:39 pm

Has anyone else noticed how all the major bankers are lining up to tell us how the take over of RBTT by RBC won’t affect competition in the Barbados banking market place? First John Beale and now Oliver Jordan who are both saying the same thing….

PRESIDENT and CEO of RBTT Bank Barbados Limited, John Beale, does not foresee any significant impact on the local banking sector from the recently approved amalgamation between RBTT and the Royal Bank of Canada (RBC).

Speaking to Business Monday, Beale stated I dont think it will have a great impact, I dont think it will affect the competition.

You’ll pardon us but somehow we can’t see that the removal of one of the major banks from a marketplace that verges on an oligopoly won’t affect the competition.

Maybe we’re just cynical but despite the goodly efforts of Mr. Beale and Mr. Jordan we remain rather skeptical.


April 7, 2008

Is The Barbados Stock Exchange Becoming Irrelevant? Is it already?

We on the margin were reflecting on the recent conclusion of the Neal & Massey BS&T takeover. Neal & Massey were successful of course in buying the entire company. Some 97% of shareholders willingly took the offer and the remainder were bought out by N&M following the 90% rule. (If you own 90% of a public company you can take possession of the other 10% of shares just by paying for them). So lock stock and barrel, BS&T as an independent entity is history. What was once considered the symbol of white corporate power in Barbados has been sold (but that is another post).

So what happens next? Of course the company will be de-listed from the BSE, it’s now a wholly owned subsidiary so it won’t be traded. As a result the numbers of companies on the exchange take a hit. This will be the latest in a series of reductions in the number of public companies in Barbados. Island Properties Ltd. was taken off the exchange by Colin Brewer & Tony Hoyos, Life of Barbados was taken down by the Mutual (now Sagicor), BWIA was grounded by the Trinidad Government. If we want to think back that far Plantations Ltd. went in a long agonizing slide into oblivion. Now we have BS&T joining the ranks of companies that were once public.

Along with this slow dwindling, there is a scarcity of new companies going on to the exchange. Of course unless you count Sunbeach (we won’t go any further on that one). To make matters worse there’s an overwhelming tendancy for people to buy shares and then hold onto them for long term appreciation. So we have far more buyers than sellers. The mutual funds have added a new dimension but the returns (if you take out the BS&T takeover) have been pretty much moribund.

Merging the regional exchanges will buy time, however the fact of the matter is the investment arena in Barbados is pretty stagnant. If you listen to the rumour mill, the stories floating around about “back room deals” may or may not have substance, but they don’t engender confidence in smaller investors.

The management of the exchange must see the trends, and also must realise that from a long term view, if they do not take action they will be consigned to the same file folder that currently holds BS&T.


February 17, 2008

Does Barbados Need An Industrial Court?

I run a small business (approx. 10 employees) if this general strike comes off next week it will cost me a significant amount of money. I have no part in this BWU/Royal Shop/Sandy Lane, and yet I will suffer a direct economic consequence of what is a Union action! In theory the Union must carry some civil liability for this cost, but in reality there is no way that I can recover this cost.

Why should I (along with everyone else) be penalised for one company’s perceived intransigence? The threat of a general strike is irresponsible and shows why we need to have an industrial court in this country.

Small Business Owner

Above is a comment by a small business owner and he asks what in our opinion is a valid question.

Historically industrial relations in Barbados has relied on a system of volunteerism. That is that collective agreements aren’t actually legal contracts but are considered to be more along the lines of “gentlemen’s agreements”; that is that either side can breach the agreement at will. Collective agreements are usually enforced by the relative power of the union and the business owner. Now here’s the funny thing… as INSANE as this system may sound, in Barbados it has actually worked! While industrial courts are well established throughout rest of the Caribbean, we in Barbados continue to function on a volunteerism basis, and have had a relatively stable IR climate for a long period of time. ‘

Now of course there are certain features of the Barbados system that make this workable, you have a very small number of very large powerful unions, and you also have a relatively homogeneous private sector. This has meant that historically, everyone knew the rules and how the game was played and everyone was prepared to give and take to make the overall system work.

Now in 2008 we still have a small number of large unions, however the private sector is no longer as monolithic as it was in the past. We have new international investors, we have regional investors, we have relatively new local players. In short we have people who are accustomed to functioning a more “rules based” industrial relations culture. They don’t know how we play the game “’bout here”

This of course leads to all sorts of complications, issues of recognition, issues of wildcat strikes. The Sandy Lane Showdown is a prime example of this. Is there a penalty for workers breaching the collective agreement? Where historically local employers have accepted the occasional wildcat strike as par for the course, someone accustomed to an environment where collective agreements are contracts will expect to be able to terminate wildcat strikers for “abandoning the job”.

Issues such as this will continue to come up. So we on the margin ask the question

Is it time that we retired the volunteerism system?

Do we now NEED an industrial court?

We think it deserves serious consideration.


February 14, 2008

Proposed Alliance Between LIAT & Caribbean Airlines – It’s Deja Vu!!!!!

Came across an article in the press yesterday that sounded like something we’d heard sometime before…….


Grenada’s Prime Minister Dr. Keith Mitchell is proposing the setting up of a new regional airline alliance including LIAT and the national carrier of Trinidad and Tobago, Caribbean Airlines.Dr. Mitchell, who recently held talks with his Trinidadian counterpart Patrick Manning, also met Tuesday with the Barbados Prime Minister David Thompson with the matter of regional air transportation high on the agenda.

Grenada is a minority shareholder in LIAT and Dr. Mitchell is proposing that it enters a cooperative agreement with Caribbean Airlines for the benefit of the regional travelling public.

“What you need is a cooperative arrangement and Caribbean Airline providing services at particular times when LIAT is not able to service those areas, and there are so many opportunities for transport linkages that can be beneficial to any serious airline that we are not utilizing,” Dr. Mitchell told the Caribbean Media Corporation (CMC).

“In my view I would say that only five percent, maximum 10 percent of our people do get the opportunity to travel within the region, in light of the current transportation problems.

“We are talking about CSME (Caribbean Single Market and Economy) and regional cooperation and at the same time our people are not able to travel,” Dr. Mitchell added.


Wonder if it will work this time.


October 25, 2007

The SC Steps In?

In a move that some would argue is long overdue, the Securities Commission stepped into the BS&T circus yesterday.

 In a statement issued late yesterday, the commission also suggested that BS&T’s 3 000 shareholders “refrain from taking any further action regarding the tendering of their shares to any and all offers until this matter has been fully ventilated and some order is restored to what has become a disorderly transaction”.

In the meantime rumours of lawsuits continue to circulate around Bridgetown.  Some of the questions being asked in particular are “Did the actions of the BS&T board in this matter result in the withdrawal of Ansa McAl’s offer?” and if the answer to that is yes…”Does the board have a legal liability to shareholders who wanted to sell their shares at $10.00?”. We on the margins don’t even pretend to know the answers to either of these questions, but in our humble opinions this whole matter is worthy of intense scrutiny.

There is enough money in question to make a lawsuit worthwhile, however there would appear to be no shortage of people to sue. One thing is for sure, this “disorderly transaction” has rattled the investing public in Barbados far more than any takeover battle before, anything less than complete transparency in this matter will result in lower confidence by investors in the local stock exchange.

The Securities Commission should intervene as the stakes are too high to let this debacle continue unchecked.


October 16, 2007

Did Ansa McAl’s Bluff Get Called?

IN the most unexpected outcome of the whole saga both Ansa McAl AND Neal & Massey withdrew their bids for Barbados Shipping & Trading today.

Neal & Massy Chairman, Arthur Loc Jack, was first to break the news of his company’s decision “to tender Neal & Massy’s 28.1 per cent shareholding in BS&T to the ANSA McAL offer and will be recommending that BS&T shareholders who had previously tendered their shares to the Neal & Massy offer, as well as those who had intended to do the same, also accept the McAl offer”.


However this was not the case as in very short order Ansa McAl issued a press release withdrawing THEIR offer.


“This decision was taken after extensive and in-depth consideration of all the factors, both positive and negative, that have influenced our ability to acquire 50.1 per cent of BS&T shares as well as to execute our stated plans to improve the performance of BS&T in the future,” it said.

“The timing of this decision was also considerate of the many BS&T shareholders who have deposited their shares with ANSA McAL that will now have the opportunity to accept the offer of the competitor, Neal & Massy Holdings Limited (N&M), before the close of their bid on Thursday 18 October, 2007.”


Now this would seem to be too much of a coincidence to us on the Margin that they should both choose the same day to withdraw and to offer each other their shares. Neal & Massey’ s Chairman Mr. Lok Jack flew to Barbados to make the announcement, Ansa McAl issued a press release.


Looking at what happened our interpretation on this is that both companies came to the conclusion that at $10.00 per share, BS&T was no longer a bargain. Neal and Massey having earlier said that “they would respond” to the Ansa McAl bid, decided to bow out rather than raise their bid of $8.50. Ansa McAl realising that they would be stuck with buying BS&T at $10.00 and having to foot all the costs of restructuring the company, hurriedly withdrew as well, rather than pony up the cash required.


This all leads us to believe that much of this whole bid was aimed at making their Trinidadian rival pay handsomely for BS&T and was not supposed to buy the company in the first place. To say that this withdrawal is an embarrassment to them would be an understatement.


So this then leaves us several unanswered questions:


1. What of the local consortium (or are they about to fade into the woodwork as well)?


2. What happens now with the current board of directors of BS&T? We think that their initial actions require some explaining.


3. Does BS&T still want to pursue a merger and is it seeking strategic partners? (which is what started this whole mess)


One thing we can all be sure of that the BS&T story still is not over, however it would seem that a new chapter is about to begin.



October 3, 2007

A Banking Fairy Tale….

Once upon a time there was a small bank called Caribbean Commercial Bank. It wasn’t very big as banks go, but it was friendly and it focussed on the needs of its customers. It came into the market at a time when banking was pretty much a “take it or leave it” proposition. Over time the little bank gained more and more customers and began to shake up the older established banks. As the little bank grew bigger and bigger the established players became more and more uneasy and started to take their small customers a little more seriously.

One day the owners of the little bank decided they would sell it to another bank called RBTT. While RBTT was a bigger bank the CCB it still was new to the market and focussed aggressively on serving the customer and winning market share. And the customers after their initial concerns, were happy as the level of service at the bank remained high (even if it was not quite what it was in the CCB days).

Then the bigger bank was bought by one of the BIG OLD BANKS in the market place….

In case you haven’t heard by now RBTT has been bought by Royal Bank Of Canada, while this can be interpreted as a vote of confidence in the development of the Caribbean, it does reduce the already small number of commercial banks in the Barbados market place.

One of the features of the Banking industry in Barbados is that the indigenous banks have brought a level of competition and innovation to the market. These aspects were severely lacking in Banking services in Barbados before the indigenous banks came along. We will have to see what emerges from this buyout. Hopefully it will not be another Canadian owned Caribbean bank with a huge balance sheet and impersonal customer service.


September 6, 2007

Is The Ansa McAl Takeover Bid Failing?

An interesting bit of news hit the press today, Ansa McAl extended the deadline on their offer for the share by another 15 days to September 21st. We on the margin would speculate that this would mean that the offer has not been taken up by many shareholders and as of the current date, if the offer was to close it would fail as a take over bid. This is not an unreasonable flight of fancy as currently they are being outbid by Neal & Massey’s $8.50 and IPL’s $8.75.

One could speculate further….

Given the environment where it seems that Island Properties Consortium is acting as a spoiler by forcing the price of the shares upwards, and where in the cases of both BNB and Brydens the minority shareholders have done better under new management, it would not be an unreasonable course of action for BS&T shareholders to hold onto their shares to see who wins the bidding war (right now NOT Ansa McAl) or just to hold on to their shares period. (most Bajan shareholders buy and hold shares anyway).

It would be highly ironic if the ultimate expression of shareholder confidence in your management ability would be for them not to sell the shares to you, because they felt you could cause the stock to appreciate after you took over the company.

(We’re sure there’s a chicken and an egg somewhere around here!)


August 16, 2007

One Board of Directors Slightly Used – Looking For Work?

Well the BS&T battle rages, and Ansa McAl is responding to the BS&T’s directors statementin the press and Neal and Massey has backraised Ansa McAl and the whole mess is just rolling along.

 It strikes me however that whoever wins this bruising takeover battle. The current board of BS&T is not going to come out of this smelling like a rose. At the very least it suffers from a credibility crisis in saying that Ansa McAl’s offer of $7.00 “does not reflect the intrinsic value of the company” but only very recently recommended that they accept $5.25 in value.

When all the dust settles the investors in Barbados (and elsewhere) are  going to review the conduct of the directors in this matter and how well they discharged their duty of stewardship for the shareholders. They will also look closely at other boards where the same directors hold posts.

There will be a reckoning.


July 26, 2007

Banks Holdings Whacks Ansa McAl – Promotes Neal & Massy.

In a stinging rebuke in this mornings papers Banks Holdings CEO vehemently denied that they supported Ansa McAl’s bid to take over Barbados Shipping and Trading. In a full page advertisement in the Daily Nation the CEO called Ansa McAl’s description of the “very enthusiastic” response of BHL management to their bid “highly inaccurate”.

Mr. Cozier goes on to endorse the Neal & Massey deal as better for Banks Holdings than an Ansa McAl takeover.

 “The BS&T Neal and Massy Deale is better for BHL than a takeover of BS&T by Ansa McAl …” – Source: BHL Ad “BHL is NOT on board with Ansa McAL” – Daily Nation 26th July 2007 Pg 15


Now here is where we have a problem with this. In making this statement Mr. Cozier in effect endorses one of the three parties in the whole BS&T/Neal & Massy/Ansa McAl/local consortium  mess that this has become. Despite the rest of the text which goes on to effectively say that BHL can do what it needs to with the partners that it has now, Mr. Cozier has in effect taken sides.

It would have been far better to have stayed completely neutral in the whole mess.


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