RADIO Jamaica says it is confident it will get an approval today for its scheme of arrangement under which it has proposed to merge with 1834 Investments in a transaction to be paid for in cash and shares.

The assurance comes from Gary Allen, chief executive officer of Radio Jamaica Limited, in an interview with the Jamaica Observer. The company on Monday sent a release to the Jamaica Stock Exchange (JSE) urging shareholders of 1834 Investments to accept the offer which will see them getting about one share in Radio Jamaica for every two shares they own in 1834 Investments. There is an option for 1834 Investments shareholders to accept $1.29 cash for their holdings or a combination of cash and shares in Radio Jamaica.

The nine major shareholders of 1834 Investments, holding some 52 per cent in value, have already committed to a share swap, Radio Jamaica noted in its release on Monday. Those shares already committed are valued at $818 million based on the $1.29 offer price under the scheme of arrangement. At the close of trading on Monday, they were valued at $685 million with 1834 Investments trading at $1.08 per share. The shares not yet committed to the swap, which are to be voted on today, are valued at over $744 million based on the swap price of $1.29 and $623 million based on its $1.08 closing price on Monday.

Underwriting arrangements have also been made with Victoria Mutual Investments Limited (VMIL) which will provide $700 million cash for up to 44 per cent of 1834 Investments shares, an arrangement which Radio Jamaica said shows confidence in the future value of the company. Under that arrangement, an 1834 Investments shareholder who opts to take cash for all or any of his 1834 Investments shares will receive that cash while VM Investments Limited will receive the shares. Given that major shareholders are already in a lock-up agreement for over 52 per cent of the shares and with VM Investments agreeing a “cash back stop” for 44 per cent of the 1834 Investments shares, Radio Jamaica is only exposed to paying cash for 4 per cent of the shares, if it comes to that, at a value of just under $63 million.

Radio Jamaica has already indicated that it is confident that it can meet such cash requirement from its own internal resources, credit lines and/or ad hoc cash back stop arrangement similar to the VM Investments Limited underwriting.

“Our public indication is just to provide assurances that we are as confident about the positive nature of the transaction as the 1834 directors would have shared with their shareholders,” Allen told the Business Observer which queried if the notice on Monday was to persuade 1834 Investments shareholders who are yet to make up their minds about the transaction. “We just want to be on record as encouraging them, because we see the positives in the same way as their directors have recommended it because it is positive,” he continued.

A month ago on July 8, 1834 Investments released its explanatory statement as required by law under sections 206 to 208 of the Companies Act, 2004, recommending its shareholders to accept the offer, which if consummated, will see 1834 Investments being wound up and integrated into Radio Jamaica.

The meeting for 1834 Investments shareholders to consider the offer is to be held today at the entity’s 7 North Street property which is now leased to Radio Jamaica Limited and is the base from which the media entity operates its print division. If the scheme of arrangement is approved today, then the company will return to court on November 24, 2022, or earlier if ordered, for the deal to be sanctioned. If that happens, the scheme will become effective on December 1, 2022 and those who opt for cash will be paid out on December 8, 2022. Those 1834 Investments shareholders who accept Radio Jamaica shares will get them on December 15, 2022, after which the company will be wound up and delisted. A date for winding up and delisting is yet to be made public.

Radio Jamaica has outlined before that part of the reason for going after 1834 Investments with a share swap offer was to target the entity’s approximately $1 billion in near cash assets and the building at 7 North Street which houses the headquarters of its Gleaner Company (Media) Limited subsidiary. The building is currently under long-term lease from 1834.

“The near cash assets of 1834 Investments will help provide the capital required for Radio Jamaica’s continued digital transformation strategy to include digital switchover for broadcast television,” the release noted. Radio Jamaica’s digital switchover is for its Television Jamaica Limited (TVJ) subsidiary.

“The revenue potential from these and other attributes of digital switch over…holds good promise for the group,” Radio Jamaica noted. “Apart from accelerating the digital switch over roll-out, access to the funding through the transaction allows continuation of the group’s radio transmission modernisation programme, which will see the upgrade of transmission for all radio brands for greater reach and better quality. It will also facilitate the continued transformation to the digital publishing platforms of The Gleaner‘s newspaper brands,” the release continued.

Through the amalgamation Radio Jamaica will assume control of the North Street operating location, an asset which was held on 1834’s books at an encumbered value on account of the lease between the two companies. The elimination of the lease will see a write up of the value of the properties to market value, realising an increment to Radio Jamaica’s asset base and therefore shareholders’ equity.

Radio Jamaica also outlined its belief in the release that 1834 shareholders who vote in favour of the scheme and receive shares in Radio Jamaica will also benefit from a far more widely held and liquid stock than 1834 currently.

“I certainly haven’t had any reaction, any calls, any queries from Radio Jamaica shareholders…I certainly haven’t had anything negative from them about it. I think they understand that the company is in an expansion and transformation mode from an analogue to becoming a digital media player and that we need to raise significant sums to do it and this amalgamation would be a good vehicle to accomplish that and at the same time secure our 7 North Street leased premises and make it our own home. The assets that we would come across can fund substantially, the agenda in our business plan for the digital transformation,” Allen added when asked how Radio Jamaica shareholders view the deal.

He added that this arrangement doesn’t mean Radio Jamaica has abandoned plans to raise money on the capital markets.

“In our expansion mode, we might see something else in another year or two years that we think is something else that we should go after and market conditions may at that time, look favourable for [a rights issue],” he concluded.