That was how James Smith, minister of state for finance, branded the Securities Industry Act, the piece of legislation that governs the Bahamian capital markets. Several recent developments have added to evidence that the minister’s remarks were spot on.
Most capital market participants have long known the main weaknesses – lack of timely disclosure, transparency and issues on corporate governance. In addition, there was the lack of enforcement teeth handed to the Securities Commission, which often has to rely, as the minister pointed out, on moral suasion.
Now, events have thrust two more issues to the fore – the acquisition of majority stakes in publicly-listed Bahamian companies and the rights of minority investors, and the involvement of listed firms in buyouts of their direct competitors.
Many Bahamian publicly quoted firms are, arguably, not truly public, with the majority of their shares held by one controlling shareholder or group of shareholders, and only a small percentage in public hands.
There have been several episodes now where the majority stakes in public companies have been put up for sale, but at present Bahamian legislation does not force the buyer to offer the same terms to the minority investors as it does to the majority shareholder.
The first case in point was the then – Colina Insurance Company’s acquisition of Life of Jamaica’s 51 per cent stake in Global Bahamas back in 2002-2003. Since then, the company into which Bahamian investors placed their money for a cumulative 49 per cent stake has changed beyond all recognition through the acqusitions of Canada Life and Imperial Life, morphing into the gigantic ColinaImperial Insurance Company that we know today.
This is not to criticise Colina, as its series of insurance acqusitions could yet deliver real profits and shareholder value. But simply to pont out that the Global Bahamas in which those Bahamians invested has radically altered in terms of management, culture, size and ambition, and that they should have been offered the same terms as Life of Jamaica three years ago.
Now, the Bahamas is witness to two more majority shareholder transactions – the BSL Holdings purchase of Winn Dixie’s 78 per cent Bahamas Supermarkets stake, and Mirant’s decision to sell off its 55 per cent investment in Grand Bahama Power Company.
These transactions have made the need for a Bahamian Takeover Code, similar to what exists in the UK, and greater minority investor protection all the more pressing. The minority investors in Bahamas Supermarkets and ICD Utilities are entitled to be offered the same terms. It is then up to them whether they take it.
The second issue is conceptualised in Abaco Markets’ decision to invest $2.S million in BSL Holdings’ bid for Bahamas Supermarkets, giving it a l0 per cent stake in the buyout group. The timing of Abaco Markets’ annual general meeting (AGM) tonight is the perfect opportunity for shareholders in the BISX-Iisted retail group to ask some pertinent questions relating to exactly how this investment and tie-up will work.
Chief among these is to find out the nature of the involvement of several Abaco Markets directors – Craig Symonette, chairman and chief executive, Frank Crothers, and Franklyn Butler – in the BSL Holdings deal, including the size of their investments.
Then, the most pressing question: Whose interests will take priority – Abaco Markets, or Bahamas Supermarkets? Both are direct competitors, and decisions that favour one may work to the disadvantage of minority shareholders in the other.
Indeed, Bahamas Super- markets shareholders should question whether, through its BSL investments, Abaco Markets will gain access to inside financial and other information to their company’s disadvantage.
But back to Abaco Markets. Tonight’s AGM should also inquire about the reasons for the June 16 resignations of Franklyn Butler, Barry Malcolm and Robert Pinder from the Board of Directors. It is understood that Mr Butler has stepped down so he can sit on the BSL Holdings Board.
The potential for conflicts of interest from the Abaco Markets/Bahamas Supermarkets situation is obvious, and although the parties say no dis cussions have happened yet, it is clear the way is being paved for a merger between the two companies. That is the only logical conclusion to all this; it would seem.
So Mr Smith is right to argue that the time for action is now. And while the Government and Securities Commission are about it, they should also strengthen disclosoure require-ments – no more should companies hide behind the excuse that they only disclose a material event of transaction when it is consummated, when the whole market knows talks have been going on for months.
Source: The Tribune
