Wednesday 26 September, 2018

SEC probes NCBFG’s takeover of GHL

Jamaican billionaire Michael Lee Chin

Jamaican billionaire Michael Lee Chin

The Trinidad and Tobago Securities and Exchange Commission will today begin proceedings for hearings on a series of transactions designed to give Jamaican businessman Michael Lee Chin controlling shares of Guardian Holdings Limited (GHL).

This, following the submission of a written complaint by minority shareholder Peter Permell on behalf of other shareholders.

The hearings will seek to determine if any of the Securities laws were breached in the transactions.

An investigative series by Trinidadian journalist Asha Javeed in the Sunday Express reveals that the transactions to give Lee Chin's NCBFG controlling interest in the company involves an intricate web of business transactions facilitated by the creation of several companies by Trinidadian businessmen Arthur Lok Jack and Imtiaz Ahamad and institutions including RBC and the International Finance Corporation (IFC).

The series revealed that in May 2016, Guardian Holdings Limited (GHL) filed five reports with the Securities and Exchange Commission (SEC) spaced over eight days in which the public company sought exemptions from the legal requirement to publish significant changes in the company’s shareholding.

The exemptions sought by GHL were approved by the SEC.

This deal is worth US$400 million.

When contacted, Permell told Loop that it all started when Lee Chin’s NCB made an offer to purchase 62 percent of GHL’s share on December 8, 2017.

“It was a voluntary offer on the face of it and they made an offer to all the shareholders and said they only wanted to buy 62 percent, they already owned 29.9 percent. I became concerned about the price. They were making offer US$2.35 cent, that price is way below the market price of TT$16.50 - $17 and when I looked at the valuation document they placed it between TT$16 and TT$19.50. Their old valuation said it was worth more than their valuation and they were only offering a US dollar price and it occurred to me they were working with a black market rate than with the official rate. That concerned me,” he said.

Permell said he and a small group of minority shareholders submitted their complaint to the SEC.

Javeed wrote that as a result, the NCBFG published a newspaper advertisement on January 12, 2018 in which it disclosed additional information with respect to their offer and takeover bid circular.

“NCBFG disclosed that Lok Jack and affiliates were paid a premium of US$3.24 (about TT$21) per share by Lee-Chin compared to the price of $13 at which the GHL shares closed on the Trinidad and Tobago Stock Exchange (TTSE) that day.

"A part of that sales agreement was a lock-up provision by which both parties agreed to limit their rights to dispose of any GHL shares until the expiry of three years from May 2016. The lock-up provision required NCBFG to make a takeover bid within the following three years to gain a minimum of 62 percent of outstanding GHL shares," the story said. 

Permell said there was a disparity in the price of NCBFG’s current offer to GHL shareholders of US$2.35 a share and US$3.24 per shares paid to Lok Jack and Ahamad companies alone by Lee Chin in May 2016. 

In the last instalment of Javeed’s exclusive, Lok Jack defended the transactions.

“We had an agreement. We sold 29.9 percent stock of the company, which we were allowed by law to do. It was a private and not a secret sale. We sold that at a premium to give him (Lee Chin) a path to control,” he said.

He said the strategic block gave Lee Chin an opportunity to move in and take control, noting that accumulating a 29.99 percent block would have taken Lee-Chin several years.

The transactions lapsed last Friday at 4 pm after all regulatory approvals were not granted.