Home' Trinidad and Tobago Guardian : November 26th 2015 Contents BG10 FEEDBACK
BUSINESS GUARDIAN www.guardian.co.tt NOVEMBER 26 • 2015
Amartya Sen in his book, "Development as Freedom", tells us
that the social and economic development of a society depends
on the level of freedom the population has in interacting with
each other socially, politically and economically.
Some of Sen s "un-freedoms" refer to the incapacity or inability
of sections of the population to satisfy hunger or achieve sufficient
nutrition or to obtain remedies for treatable illnesses or the
opportunity to adequately clothe themselves or provide a roof
over their heads due to lack of economic resources.
Hence a democratic society in its thrust for economic devel-
opment has to embed in its governance social justice, equity;
help to those with low incomes who do not possess the freedom,
for example, on their own to negotiate and trade in the market
for adequate housing.
The longer term objective of governance is to provide oppor-
tunities to reduce these un-freedoms of Sen to increase income
capability and power to negotiate in the market place for such
Hence it is only right that our government seeks to assist those
who are income constrained via subsidised housing for their
families via taxation and rents from the exploitation of our natural
Taken in this context, and say that such subsidisation is the
right of all citizens, whatever their income state, is to ignore first
that the right is really to possess the freedom to negotiate in the
market for housing, secondly help is needed to alleviate the social
incapability of those who are income constrained and not able
to enjoy this freedom and thirdly the role of governance is to
continually present opportunities to increase income capability.
Such public sector support is more about social justice and not
discrimination against those who possess the income freedom
to negotiate in the market place.
The current situation in which our government has found
itself, wherein such subsidies are given also to a section of the
population that could have the economic freedom to negotiate
in the market for housing, engendered a market distortion/failure.
Given such a subsidy, or potential subsidy, the private sector
was relieved of the market opportunity to provide for the pop-
ulation section that could be considered middle and upper middle
class, focussing instead on government construction contracts
and upper class housing. Surely housing costs are rising as many
other things. However, there are housing construction systems
that exists and are evolving to combat such price increases. For
example, houses are still being built brick by brick in every con-
Yet there are factory systems that benefit from construction
technologies and economies of scale. Also, on an island that is
constrained by space, some of which is needed for agriculture,
single houses on a 5,000sqft lot of land are becoming obsolete.
The move by the current government to reduce the income
ceiling to $25,000/mth per family is a move to serve the income
constrained and to force the market negotiation among the sup-
pliers of houses and those with the income capacity about form
and quality of the product and the finance houses on return on
In general, governments in T&T have distorted the market
with its subsidies on fuel, electricity, water, you name it we sub-
sidise it (as put by a local wag). Besides supporting those who
do not have income freedom to provide certain goods and services
for themselves it is the responsibility of our governments to
provide public goods. These include health, safe surroundings
free from disease and crime, general education, basic transportation
systems- many of which in T&T are woefully inadequate.
Still, whatever help and/or opportunities our governance system
can provide to alleviate Sen s un-freedoms and ensure social
equity, depends on the economic development of the country.
Today our apparent development depends on the rents we
receive from the exploitation of a depleting petroleum resource,
so much so that an economic crisis is at hand.
Increasing the freedom of the population to respond to this
crisis is the role of visionary leadership in both government and
otherwise. Both sing the need to diversify the economy, but some
fifty years later diversification remains something we would like
for Christmas, a gift from foreign investment as we languish in
our un-freedoms and subsidies.
Mary K King
On Monday, a local shareholder of Banks
Holdings Ltd, the Barbadian beverage company,
reacted to the views expressed by chief editor,
business, Anthony Wilson, in the Sunday BG
of November 22, headlined, "Whose interests
are BHL serving?"
Breach of corporate governance
Sound corporate governance is a fundamental pillar for
the functioning of any publicly traded company.
The articles of Banks Holdings Ltd (BHL) provide for one
class of common shares. When a company has only one class
of shares the Barbados Companies Act enshrines the principle
of equality of rights in all respects for all shareholders of the
same class of shares.
From what I understand, the contention by ANSA McAL,
supported by the representative action brought by an additional
group of shareholders, is that the Companies Act of Barbados
and the Articles of Amalgamation of BHL were not complied
with by the BHL board of directors in committing the company
to a 2010 convertible debt agreement.
The 2010 agreement created a class of shares (conversion
shares) that have rights superior to those of all other common
shares. The only holder of those conversion shares issued by
virtue of that agreement was SLU Beverages, Ltd, which is
now owned by the Brazilian drinks company AmBev.
In particular, one of the superior rights attaching to the
conversion shares was an option given to SLU to elect to
have BHL mandatorily repurchase, at 2.5 times its value, its
conversion shares exercisable, among other things, where
anyone other than SLU Beverages, obtained a 25 per cent or
greater stake in BHL ("$10 put option clause").
This would not be an issue if, in fact, the directors had
requested and attained the approval of all the BHL shareholders.
It is a standing fact that they did not.
What they did do was go through great lengths to hide
and conceal from shareholders the rights they provided under
the agreement. It is also very likely and questionable that in
2010, when the debt agreement was signed, not all of the
serving BHL directors were privy to or permitted the oversight
and approval required by them in their fiduciary duty as
These superior rights---including the $10 put option, that
the BHL board provided to Latin Capital/SLU Beverages
under the 2010 agreement, to the exclusion of all other com-
mon shareholders---were not disclosed to the other share-
holders. It should be obvious that as a consequence the rights
For clarity, it is also important to note that Latin Capital
financed the BHL brewery upgrade under the agreement in
2010. However, the characterisation of that transaction as
debt financing is questionable given that the vast majority
of the debt was almost immediately converted into equity
In 2010, Latin Capital wholly-owned SLU Beverages. Latin
Capital has sold SLU to AmBev, who is currently leveraging
the said rights in the ongoing takeover battle. Latin Capital
is a private equity fund with financiers that are allegedly
related to AmBev.
This raises serious governance concerns, which should be
treated with seriously.
Restrained bidding situation
The mechanism by which shareholders maximise value in
a take-over situation is by the unrestrained, competitive
bidding process. In simple language, in the event of a take-
over bidding process, like the one currently underway, the
"put option" has the undesired effect for all shareholders
• Of deterring any other bidders from the possibility of
even bidding. This means that shareholders are forced into
an uncompetitive takeover bidding process and the BDS$4
(USD$2) originally offered!
• Limiting a competing bidder s ability to maximise their
bid price by the value of the put option again meaning that
all shareholders get less value.
• Securing for SLU/AmBev a premium price for its shares
in BHL over and above that on offer to shareholders in a
company which only has one class of common shares.
This $10 put option has suppressed the demand for the
BHL shares from all buyers other than SLU Beverages. The
BHL Board has effectively destroyed the value of the BHL
shares and handed the company to SLU Beverages since 2010.
In this current case, ANSA McAL as a regional conglomerate,
with strategic interest in the beverage space with a longstanding
interest in BHL, has despite the onerous obstacle of the "put
option" entered the bidding with the aim of securing the
The put option in the 2010 agreement was unapproved
by shareholders and thus unenforceable. From reports in the
Barbados media, it seems that ANSA McAL is committed to
pursuing legal action to have this abhorrent deterrent to a
fair and unrestrained competitive bidding process removed
in the interests of all the BHL shareholders.
ANSA McAL also has the highest registered offer currently
at BDS$7 or US$3.50 per share.
by BHL board?
The curse of
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