The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Cable Bahamas’ largest shareholder “abstained” from voting in favour of its $100 million worth of Florida acquisitions, after “foot dragging” by its government ‘owner’ meant several pre-conditions for the transactions’ approval could not be met.

Despite “unanimous approval” from all other shareholders, the National Insurance Board (NIB) ‘withheld’ voting its 22.3 per cent equity stake in favour of Cable Bahamas’ US expansion because the Government has yet to formally appoint its three representatives to the BISX-listed communications provider’s Board of Directors.

Because these directors have not been appointed, two key pre-conditions set by the Government for approval - and which were supposed to be completed before Wednesday night’s Extraordinary General Meeting (EGM) - have not been met.

Tribune Business contacts who attended the EGM said NIB and government officials declared the meeting ‘procedurally invalid’ as a result, and suggested it another EGM should be fulfilled after these conditions were met.

However, the meeting and shareholder vote proceeded, with one observer describing the whole affair as “an embarrassment” for the Government and NIB, as they were effectively ‘hoisted by their own petard’.

The two conditions in question are the requirements that the purchase prices for Marco Island Cable, NuVu, US Metropolitan Telecom and Summit Broadband be “considered and approved” by the Government-appointed directors on Cable Bahamas’ Board.

And the same directors are also required to approve the terms of the payout to deal ‘insiders’, namely Cable Bahamas chairman Philip Keeping and his fellow director, Troy D’Arville, which is to be based on the targeted companies’ performance over 30 months.

Both these conditions were supposed to have been met before Wednesday night’s EGM, but could not be - because the Government had failed to appoint its three Board members in time.

But with almost 78 per cent of Cable Bahamas shareholders voting in approval of the Florida expansion, the four deals have now been approved at the corporate level.

One capital markets observer said the major question now was whether the Government would waive the requirements that the two conditions be approved before an EGM, or if it would force Cable Bahamas to hold another such meeting - something the Christie administration itself will have caused to happen.

“It was fairly embarrassing on Wednesday night,”one source said. “Now what is required is for the Government to complete the last two points.

“This is another example of government dragging its feet and holding up a private transaction. The Government ought to be embarrassed by this. There was no indication this was going to happen with NIB until they held the meeting.”

The situation is seemingly another example of the Government ‘dropping the ball’, and the left arm not knowing what the right is doing.

“It’s fairly poor planning, and indicative of the gap in communications between Cable Bahamas and the Government, plus the problems they’ve been having for the past six-seven months,” another EGM attendee said.

“It shows the interests of the Government and Cable Bahamas are not necessarily aligned. If the Government does not go ahead with those two conditions, they will be going against the expressed viewpoint of the shareholders of the company.”

Tribune Business was told that soon after the EGM started, senior Ministry of Finance official, Simon Wilson, said the Government/NIB would ‘withhold’ their proxy vote because the two specific conditions had not been met. This was then confirmed by Rowena Bethel, the newly-appointed NIB director, who was also at the EGM.

“Cable was then put in a position of explaining why those conditions were not met - the Government had not formalised its directors,” one source said.

Tribune Business was separately told that NIB had been voting ‘Yes’ in favour of approving the deals right up until the EGM, but had to abstain otherwise it would have “pre-empted” the work of the Government’s directors.

One contact described the situation as “a timing issue”, and said it “potentially” could further delay Cable Bahamas’ completing its acquisitions.

This will all depend on how quickly the Government gets its Board directors in place, the pace at which they complete their work, and whether the condition that this is done before an EGM is waived.

The Christie administration has known of the need to appoint its Cable Bahamas directors for months. The previous incumbents, Sandra Knowles and Frank Watson, were appointees of the former Ingraham administration, and their resignations were announced several weeks ago, together with that of Algernon Cargill, the former NIB director.

Cable Bahamas made no mention of the NIB ‘snafu’ in its official statement on the EGM outcome, and Anthony Butler, its president and chief executive, declined to comment when contacted by Tribune Business.

This is likely due to Cable Bahamas not wanting to upset the Christie administration, which could result in further delays to a tortuous approvals process that has already taken almost 10 months to reach this point.

The BISX-listed communications provider confined itself to merely stating that “shareholders overwhelmingly endorsed” the deals.

Franklyn Butler, a Cable Bahamas Board member, and a member of the special committee that evaluated and negotiated the transactions on behalf of the company, said: “The shareholders have spoken, and the level of support is very encouraging.

“This will be the first time a major Bahamian company has taken steps to expand internationally, and I am proud to be part of the team that is making this happen.”

Mr Butler added: “This is a further milestone that has been met for Bahamian regulatory approval, and we anticipate closing these transactions in the coming weeks.”

Tribune Business previously revealed that Cable Bahamas is predicting its US acquisitions will triple annual revenue and operating income growth rates beyond what it would achieve if its activities remain confined to this nation.

The BISX-listed communications provider, in the proxy form issued to shareholders, forecasts that the acquisitions will see it achieve compound annual growth rates for revenue and EBITDA (operating income) of 9.6 per cent and 11.8 per cent, respectively, for the five years to end-2017.

This compared to revenue and earnings before interest, taxation, depreciation and amortisation (EBITDA) growth forecasts of 2.3 per cent and 4 per cent, respectively, if Cable Bahamas’ remained a Bahamian-centric company as it is now.

Outlining the rationale for its bid to acquire Summit Broadband, Marco Island Cable/Nu Vu and US Metropolitan Telecom, the Cable Bahamas’ proxy projected that by 2017, its Florida interests would account for 31.7 per cent of total EBITDA.

This would equate to $20.5 million, out of Cable Bahamas; total operating income of $64.6 million - a major leap from the $44.1 million the company is projected to earn if it remains 100 per cent concentrated in the Bahamas.

In similar fashion, Cable Bahamas is projecting that its US purchases - if finally consummated - will generate 40.8 per cent of company-wide revenue in 2017.

At that point, the BISX-listed communications provider is forecasting that $86.7 million in revenues will come from Florida, taking the total to $212.6 million - as opposed to the $125.9 million that would be generated if it remained focused solely on the Bahamas.