Brian Wynter

THE Financial Services Commission (FSC) has launched a probe into the takeover bid for Kingston Wharves, apparently with the intention of establishing whether the group of minority shareholders seeking boardroom control, together have 50 per cent or more of the shares in the porting company.

The consortium - consisting of half a dozen companies -- has publicly declared its shareholding to be 49.5 per cent, just below the 50 per cent threshold that would have required the group to make a mandatory buyout offer to all the other shareholders.

Roger Hinds

Yesterday, Roger Hinds, the chief executive office of Transocean Shipping Limited, confirmed a report made to the Observer that members of the consortium -- including his company -- were written to, by the FSC last week Friday.

"I can confirm that a letter has been received, dated Friday February 14 under the signature of Brian Wynter," said Hinds yesterday. "They have indicated that the FSC is doing investigation and have outlined a number of factors and concerns which they have asked us to respond to."

Wynter, the executive director of the FSC, has given the groups until March 3rd to respond to his queries.

Hinds declined to go into details, but other sources say that several individuals and companies were written to, by the FSC, as it sought to establish just how widespread the minority shareholder grouping was.

Under the Jamaica Stock Exchange rules governing mergers and acquisitions, any entity or groups acting in concert, and which cross the 50 per cent shareholding in a listed company, must make an offer to all the shareholders. The offer must be at the stock price at which the entity would have crossed over the 50 per cent ownership.

Apparently, the FSC has concerns that the group of minority shareholders may have crossed over the 50 per cent ownership threshold. Sources told the Observer last night that the regulatory agency, in doing its calculation, may have included among the consortium, shareholders that have not been formally declared to be members, but who may have expressed sympathy for the position of the minority shareholders.

It was the consortium that requested Tuesday's extraordinary general meeting with the expressed intention to remove from the board of Kingston Wharves, most of the directors who were nominated by Grace, Kennedy and Company. Grace controls 43 per cent of the porting firm, for which it also has a management contract.

Grace has already attempted to thwart the boardroom coup d'etat by asking the Supreme Court to bar from voting, two of the major shareholders that the consortium was counting on to secure 49.5 per cent of the votes. These are the Shipping Association of Jamaica and the Port Workers Superannuation Fund. On Tuesday, Jamaica's chief justice Lensley Wolfe postponed the shareholder meeting until next week Tuesday, saying that he needed more time to hear the arguments from all sides, and research the issues.

What is yet to emerge publicly, is the direction in which the FSC is taking its investigation. Up to last night the Observer was unable to reach any of its usually reliable sources to secure a copy of the FSC letter.

It is noteworthy however, that question have been raised in legal circles as to whether a boardroom shakeout could, under the JSE take over rules, be deemed an effective change in ownership and thus warrant a take-over offer. The JSE rules speak specifically to crossing over the 50 per cent ownership as the sole basis on which the offer must be made.

Others have suggested that given the restrictive definition of what constitutes a takeover, the main focus of the FSC's investigation is whether there is evidence that the consortium has pulled together, votes that are outside of its declared power base, and so have crossed the 50 per cent threshold.

If the takeover rule is triggered, it would represent a major ironical twist of event in the year-long power struggle for control of the wharves. For, last year, Grace was itself instructed by the JSE and later the FSC to make a take-over bid for Kingston Wharves after its pension fund acquired an11 per cent holding from a British company. The JSE argued that Grace and its pension fund were de facto indistinguishable, and with the combined holding being more than 50 per cent, Grace was ordered to make a take-over bid for all the shares.

Another bit of irony is that, as a compromise remedy, Grace eventually sold back the shares - to the superannuation fund - which later pledged those shares in favour of the camp that is now seeking to end Grace's control of the Kingston Wharves board.

The take-over rule is in place to give current shareholders a fair opportunity to back away from a company where the ownership has changed.

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