The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Cable Bahamas has not been leaving tonight’s shareholder vote on whether to approve its $100 million Florida expansion to chance, Tribune Business can reveal, with senior management calling institutional investors to ensure their support.

Multiple sources have confirmed to this newspaper that Cable Bahamas chief executive, Anthony Butler, has been contacting numerous key investors and their advisers in the run-up to tonight’s Extraordinary General Meeting (EGM) to explain the rationale for the four acquisitions.

Some of those contacted said it was clear that Mr Butler and the BISX-listed communications provider “don’t want any surprises”, especially as a ‘Yes’ vote by a majority of shareholders at the EGM is one of the conditions the Government has set for approving the acquisitions.

And they also disclosed that Mr Butler had effectively confirmed that Cable Bahamas is ‘hedging its bets’ on its largest potential growth opportunity in this nation - winning a bidding war for cellular licence.

“I think Tony Butler was trying to get as much backing from the investor base, particularly the institutions, in supporting the deal,” was one source’s take on Mr Butler’s rapid working of the phones in the past few weeks.

“This was clearly to achieve one end, which is to get everyone to vote in favour. Perhaps there’s a fear, remotely or otherwise, that people will not vote in favour of the deal.”

The source emphasised that there was nothing wrong with Mr Butler’s actions and, indeed, taking such soundings from key shareholders is normal for any publicly-listed company - especially if the fate of key corporate manoeveres, such as mergers and acquisitions, is at stake.

“He’s working in his best interests,” they added of Mr Butler. “There’s nothing wrong with that; he just doesn’t want any surprises.”

Cable Bahamas shareholders are expected to vote in favour of its Florida expansion by a fairly wide margin, given the boost it is expected to generate for the company’s earnings, investor returns and stock price.

A potentially key player will be the National Insurance Board (NIB), which holds 22.3 per cent of Cable Bahamas’ ordinary shares, making it the company’s largest equity investor.

An NIB ‘Yes’ vote will give Cable Bahamas almost half the backing it needs to reach the finishing post in terms of investor approval.

And which way NIB goes will give a further insight into the Christie administration’s attitude towards Cable Bahamas’ expansion plans, the Government having taken around 10 months to make a decision on giving the purchases conditional approval.

Observers suggested NIB would also vote in favour of the Florida expansion, given that the forecast increase in Cable Bahamas’ share price and dividend returns would only benefit its beneficiaries - the Bahamian people.

“Are they going to vote not to expand the value of that interest?” one source asked of NIB. “I doubt it. That would seem to be shooting yourself in the foot. But stranger things have happened. This is still the Bahamas.”

Meanwhile, former NIB director, Algernon Cargill, is set to be replaced on Cable Bahamas’ Board by an internal candidate. Tribune Business understands this will either be Mr Cargill’s successor, Rowena Bethel, or NIB’s investments chief, Phaedra Knowles-Mackey.

Two other directors are also required to replace Sandra Knowles and Frank Watson, who have also stepped down from Cable Bahamas’ Board.

They were effectively government-appointed, and approved, directors. Tribune Business understands that James Smith, CFAL’s chairman and current minister of state for finance, plus ex-PricewaterhouseCoopers (PwC) accountant, Edgar Moxey, are among the candidates to replace them.

Mr Butler, though, has not responded to Tribune Business voice mails seeking comment for the past two days.

However, several investors contacted by this newspaper said the Cable Bahamas chief executive had indicated the company was not pinning its hopes on acquiring a Bahamian cellular licence and going head-to-head with the Bahamas Telecommunications Company (BTC) in the only sector it has yet to enter.

“They couldn’t rely on liberalisation of the cellular market to expand their business,” was one source’s interpretation of the company’s message.

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.