Berger suspension not unusual, says JSE boss
Published:Friday | October 6, 2017 | 12:00 AMSteven Jackson
Jamaica Stock Exchange (JSE) took the step last week of suspending trading in the Berger Jamaica stock during a period when a mandatory takeover offer was on the table, creating disquiet among some investors.
But the JSE says there was nothing unusual about the decision, saying such suspensions have happened at least twice in the past five years.
It follows outreach by some stockholders who described the action as an accommodation of ANSA Coatings International Limited, the new parent company for Berger, that served to rob them of the opportunity to continue trading their shares.
The Ideal Group was one of the vocal critics.
"How can the Jamaica Stock Exchange suspend Berger trading on the market to facilitate ANSA? I do not understand what power is guiding them," Donovan Lewis, principal of Ideal Portfolio Services Company Limited and the largest minority holder of Berger shares, said at the weekend.
"There is discontent in the market," he said.
Lewis added that the stock was rallying higher at the time, and the effect of halting trading could have created a false impression among minority shareholders that it was in their interest to sell their holdings.
The suspension runs from October 5 to 13, which means trading will resume on October 16. The mandatory offer from ANSA Coating to acquire the 48.99 per cent of outstanding Berger Jamaica shares closed Monday, October 9.
The JSE insists it was not pressured to halt trading, as alleged, nor was the action precedent-setting, while noting the suspension was allowed under JSE Rule 411.
"We did not bow to anyone," said JSE Managing Director Marlene Street Forrest in an interview with Gleaner Business on Monday.
She indicated that normal procedure allows for any company to ask for the suspension of its shares during a takeover offer. The suspension was done to allow for the smooth tallying of holdings for shareholders who had accepted the offer.
"We would not unduly deny that request," said Street Forrest.
Lead broker for the offer, Scotia Investments, and others will tally the acceptances by Thursday, said Street Forrest. On Friday, the JSE will reconcile this list and upload the information to its website.
"You do not want a situation occurring where persons decide to sell their shares when they have accepted the offer," said Street-Forest. "We want to make sure that we don't have persons trading in the security when they accepted the offer or the tally can get messy."
Rule 411 B states: "A listed company may make application to the Exchange to be delisted or to suspend trading in its securities. Any such application must be in writing, stating in as much detail as possible the reason for the application, and accompanied by a certified copy of the resolution of the Board authorising the application for delisting or suspension."
JSE added that similar suspensions occurred during the takeover of Desnoes & Geddes Limited by Heineken, and Pegasus Hotels of Jamaica, which was acquired by Quivin Holdings. During the mandatory offers to minority owners Pegasus Hotels was suspended for seven days while D&G was suspended and never resumed trading, Street Forrest said.
"This is not precedent-setting; this is what normally occurs," said the JSE boss. "The JSE has no axe to grind. We are looking out for shareholders. We are not trying to suppress or depress the stock."
No trades cancelled
The timing was such that the suspension occurred three days before the close of the offer on Monday. Street Forrest said no trades were cancelled leading up to the suspension.
"This is not the first, second or last time this will be done. It wasn't suspended because of the price.
It was suspended to ensure the orderly processing of the transaction," she said.
ANSA McAL Group, through subsidiary ANSA Coatings, took over the regional assets of Berger in July.
In late September, the directors of Berger Paints Jamaica recommended that minority shareholders accept the takeover offer of $10.88 per share from new owner, even though the stock was trading higher at the time.
Berger Jamaica traded at $15.81 on the day prior to the mandatory takeover offer from ANSA Coatings.
The stock had been rising constantly and began trading above $10 towards the end of January. It peaked at nearly $24 around midyear, but has fallen back to around $11 prior to being halted.ANSA Coating has said the bid price replicates the value placed on the holding under the deal completed in July. Ideal's wealth manager, Ryan Strachan, suggested that $18 would have been a more attractive offer.