The H&L-contested takeover bid

• When the sprat swallowed a whale

I refer to the Business section of your September 14th issue reporting on the hostile takeover bid by the Black Sand Acquisition of Lascelles deMercado in which the LdM directors are quoted as saying, "This is the first attempt at a hostile takeover in Jamaica."

This is not so, and, in the interest of accuracy and to preserve the historical integrity of Jamaican financial history, I write to draw the public's attention that the first hostile takeover was of Hardware and Lumber (H&L) by Pan Jamaican Investment Trust in 1969.

The stock market started trading in 1962, and the shares of H&L were one of the first to be listed. H&L was founded in 1927 and was the island's largest distributor of lumber and hardware items.

Its chairman was Mr. Fred Harris, an Englishman, who sat on the boards of 10 Jamaican companies and statutory bodies. Other directors included Leslie Ashenheim, Lionel deCordova and Dossie Henriques.

I had recently sold Wherry Wharf to Pan Jamaican and been appointed its managing director. I suggested to Maurice Facey, chairman of Pan Jamaican, that a private sufferance wharf such as Wherry Wharf for unloading lumber would create considerable efficiencies. Why not have a try at taking over H&L?

The initial bond comprised cash, Pan Jam shares and unsecured convertible debentures, which worked out to a purchase price of £1,600,000 - a sizeable sum in 1969. This was rejected out of hand by Derek Stone, legal advisor to the H&L board. So the battle was joined.

The Gleaner played an important role in recording the hostilities editorially and in a series of advertisement. Pan Jam's opening salvo was an ad in The Gleaner of July 8, 1969. H&L replied with a series of ads advising H&L shareholders NOT to accept the Pan Jam offer and the business community in Kingston was agog as to what was going to happen.

The cash portion of the Pan Jam offer was to be provided by Citibank, supported by Bill Rhodes, the then manager of Citibank in Jamaica. Rhodes, a rising star in the Citibank system (he ended his career as its president), had taken a shine to Maurice Facey and me as a new breed of Jamaican entrepreneurs who would shake up the 'commission' mentality of most trading houses in Jamaica.

Acceptances were coming in very slowly. A revised and improved offer would be necessary, making the cash amount beyond Bill Rhodes' limits. While Maurice Facey manned battle stations to convince reluctant H&L shareholders to tender their shares, I was in New York negotiating increased facilities with Citibank headquarters.

Facey could not authorise publication of a revised offer until I had obtained bank approval. This was finally negotiated and the revised offer was published in The Gleaner on August 11, 1969, the day I returned to Jamaica.

The Gleaner carried its own news item, the opening paragraph of which read: "In a fantastic bid to acquire the entire company of Hardware and Lumber Limited, Pan Jamaican Investment Trust Limited has revised its offer to H&L shareholders."

Part of the text of the revised offer summed up its highlights as follows:

(a) Of the total offer, 70 per cent or £1,147,406 was in cash.

(b) It is 100 per cent higher than the current level at which H&L shares were trading since 1962.

(c) It gives the H&L shareholders the equivalent of 15 years profits - nearly double the price/earnings ratio for similar companies in the UK.

(d) The proceeds of the offer, if invested at nine per cent, would earn 11 shillings per share - double the average dividend paid by H&L since 1962.

Mirabile dictu, when the final deadline expired at 4 p.m. on August 24, 1969, the count showed that 51 per cent of the H&L shares had been tendered. Pan Jam accordingly declared the offer unconditional and, thereafter, the flow of acceptances increased. Pan Jam's audited profits for the year previous to the takeover were a mere £3,524. Truly, a sprat had swallowed a whale!

Dr Ralph Thompson is managing director of C.D. Alexander Realty.