Tempers flare at Pegasus meeting
Published:Friday | February 25, 2011 | 12:00 AM
Minority partners demand more info from Hendrickson
Dionne Rose, Business Reporter
A meeting of Pegasus Hotel of Jamaica shareholders on Thursday that was supposed to be about amendments to the company's articles to reflect the change of ownership, set the stage an hour later for an eruption into shouts and flared tempers, with minority interests complaining that they have been denied information to make an informed decision about a mandatory offer by Quivin Holdings Limited to acquire their holdings.
On Tuesday, John Issa, shareholder and former chairman of Pegasus Hotels, scored a victory against Quivin, which is controlled by Kevin Hendrickson, when the Supreme Court backed his position that the company should extend the offer period beyond the amended February 23 date.
Shareholders were initially given three weeks in which to subscribe to Hendrickson's offer, which opened on January 19 and closed on February 10, but later extended to February 23 after Quivin satisfied a Financial Services Commission (FSC) request for clarification whether it planned to vary emoluments of directors after the acquisition. The answer was no.
Issa, who represents minority shareholders on the board, told the meeting that he had applied to the Supreme Court on behalf of the minority shareholders to force Quivin to produce additional information linked to the value of The Jamaica Pegasus, the sole asset of the hotel company, and plans to upgrade it.
Issa has personal holdings of 7.6 per cent or 9.17 million shares in the hotel. Middle East Ventures is the second-largest shareholder with 19.84 million shares orHarry Maragh, who says he owns some four million of the hotel company's shares, complained to the Financial Gleaner that he believed the hotel was undervalued in the sale to Quivin - the transaction was valued at US$11 million - leaving investors without a true picture of the value of the property, he charged.
The Quivin offer is priced at J$13.14 per share, equivalent to what it paid Urban Development Corporation for subsidiary company National Hotels and Properties' 59.81 per cent interest, or 71.865 million shares in the hotel.
Stock market rules require purchasers of more than 50 per cent shareholding in a listed company to make an equivalent offer to minority owners. Hendrickson has said he plans to delist the company if he ends up with more than 90 per cent of the equity. That could change, his lawyers said Thursday.
Pre-empting what could have began a lengthy legal fight with Issa, Quivin's lawyers told the court on Tuesday that the company would undertake to provide information as required by the Securities (Takeover and Mergers) Regulations of 1999 and the rules of the Jamaica Stock Exchange, "to the satisfaction of the FSC".
Justice Anderson, who heard the application in chambers Tuesday, set no definite date for the offer to close, but ruled on the basis of Quivin's undertaking that once the FSC said it was satisfied with the information, the mandatory offer to minority shareholders would stay open for 14 days.
Issa was represented by attorneys Lord Anthony Gifford, QC and Conrad George, while Michael Hylton, Kevin Powell and Lance Hylton appeared for Quivin.
"I had felt that the FSC regulation requirements had not been fulfilled," Issa told the Financial Gleaner after the meeting.
His disclosure of the court application had been cut short earlier in the meeting by new Pegasus chairman Milton Samuda, who said the issue was beyond the scope of the extra-ordinary meeting.
The meeting was called to consider two resolutions to amend the Articles of Incorporation, deleting from Article 80 the words 'National Hotels and Properties Limited' and replacing same with the words 'Majority Shareholder', and inserting a definition of majority shareholder as "any single shareholder which is registered as the owner of 50 per cent, or more, ordinary voting shares of the company." The resolutions passed on a vote of 18 to 2.
Samuda had also intervened to prevent heated exchange between Quivin's lawyer, Lance Hylton, who had contradicted Issa that there was no court action and that the matter was now settled.
During the cross-talk, Hendrickson, who was present, remained quiet.
"The information required to give to the minority so that they can make reasoned judgement as whether to sell or not and the offer was going to end on the 23rd, and I filed an action for an injunction to have the offer not end," Issa clarified.
"But prior to going before the judge, they agreed to extend the offer until 14 days after the FSC has said that the required information has been given to the shareholders."
Issa said these requirements included a business plan for the hotel; Quivin's objectives for the business; how they plan to run it, what would become of the staff, among other things.
He said none of that information was presented along with the offer, which is required by law.
Hylton told the Financial Gleaner that Quivin had decided it would comply with the wishes of the FSC.
"Quivin had always indicated to the FSC, by letter dated February 10, that it was prepared to extend the offer for any shareholder who wanted more information. For some reason, in Mr Issa's action, that wasn't mentioned; and when that became clear, his action was effectively discontinued because what the action called for was for immediate delivery for various information," he said.
He said Hendrickson was currently preparing plans for the hotel and that he was willing to postpone the offer until the information was provided to the FSC.
But Issa was not the only disgruntled minority shareholder; Maragh told the Financial Gleaner he would not be accepting the offer.
"The fact of the matter is that it is a slap in the face of the minority shareholders in this country," said Maragh, a shipping executive and former president of the Shipping Association of Jamaica. who says he owns some four million Pegasus shares.
"The value of those shares is about J$27 to J$30; the finest piece of real estate in this country is being given away," he charged. "I look at it as a very fine piece of investment that has been given away by the Government of this country."
But Hylton hit back, saying that the sale was by public tender and that could have bid for the property.
"The Government did a valuation; that valuation said the amount offered and paid to them was proper," he said.
Hylton said up to Tuesday, the owners of a combined 2.5 million shares - representing some two per cent of the company's outstanding shares - had accepted Quivin's offer, which is seeking to acquire more than 48 million shares.
"They are all happy with the offer and have accepted," he said.
Hylton said Quivin's initial plan to delist Pegasus may change.
"We are not sure that will happen at this point," he said.