The board of Caribbean Producers (Jamaica) Limited (CPJ) have recommended that existing CPJ shareholders accept the takeover bid by majority shareholder A S Bryden & Sons Holdings Limited (ASBH).

This was communicated to investors through the directors’ circular published on Friday. ASBH currently owns 75.28 per cent of CPJ and launched a takeover bid on January 10 to acquire an additional 51,782,469 ordinary shares or 4.71 per cent of the company. The offer put forward to existing shareholders is that for every 35.23 shares of CPJ they surrender, they would receive 10 new ordinary shares of ASBH. If a shareholder has less than 35.23 CPJ shares after that conversion, they would receive $10.50 per CPJ share in cash, which is capped at $367.50.

The board of CPJ appointed a special board committee composing Stephen Dear, Theresa Chin and Ronald Schrager to make a recommendation that would represent the overall board’s position on accepting or rejecting the offer. Dear chaired that special committee.

Based on the special committee’s recommendation, the overall CPJ board, which is governed by persons with significant economic interests in ASBH, recommended that shareholders accept the offer. The board stated that it took this position since ASBH doesn’t intend to change the management or business of CPJ, ASBH offers tremendous diversification with its various product divisions and that the offer price/consideration is reasonable in relation to comparable trading companies.

The circular also outlined an evaluation of the offer which included an implied value and premium analysis. Based on the offer terms, an exchange ratio of 0.284 share of ASBH to CPJ was determined. After using the average 30-day closing prices of ASBH and CPJ of $31.70 and $8.26, respectively, and the exchange ratio, it was determined that the value of each CPJ share was $9. As a result, it was stated that ASBH represented a 9.1 per cent premium above CPJ’s average 30-day closing price and a 5.76 per cent premium relative to the closing CPJ price of $8.51 on January 7. ASBH closed on Tuesday at $30.60 while CPJ closed at $8.98.

Other considerations mentioned for accepting the offer included geographic diversification of ASBH, consistent dividends paid by ASBH and liquidity. It was noted that ASBH will be a leading premium beverage distributor in Trinidad & Tobago, Barbados and Jamaica which means that shareholders who accept the offer would also own a larger and more diversified company. With respect to liquidity, it was mentioned that the float of CPJ would be severely reduced after the offer as ASBH seeks to acquire up to 79.99 per cent of CPJ’s ordinary shares. Thus, it was noted that owning ASBH would result in a more widely held stock where its largest shareholder Seprod Limited only owns 50.63 per cent of ASBH’s ordinary shares.

“ASB has a track record of paying dividends and aims to distribute approximately 40 per cent of net profit available for distribution as dividends. Shareholders who are resident outside of Trinidad can expect to receive dividends in US Dollars,” stated the directors’ circular.

The only risk outlined in the document was operational risks related to the successful integration of CPJ’s operations, systems and culture into ASBH. It also said, “Integration could be impacted by disruptions to business activities and a failure to realise projected synergies.

The takeover bid offer by ASBH closes on February 14, just three days after CPJ will hold its annual general meeting on January 11 at Grand A View Restaurant and Events Place in Montego Bay, St James. ASBH, CPJ and Seprod should all release their unaudited quarterly results by that date as well. Thomas “Tom” Tyler was elected as a director of ASBH on January 16, after an extraordinary general meeting, while Anthony Mark Hart was appointed a director of Seprod on November 27 after a Seprod EGM.