The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The St George family has been accused of thwarting the Grand Bahama Port Authority’s (GBPA) potential sale to a $203 billion private equity group by failing to provide timely statements detailing its financial performance.

In statements likely to reignite tensions within Freeport’s quasi-governmental authority, Hannes Babak alleged that Sarah St George, its co-chair, “stalled” on providing the GBPA’s financials to the world-renowned Carlyle Group.

Mr Babak, the ex-GBPA chairman who drew much of the St George estate’s ire during the four-year legal battle over the group’s ownership, is claiming that the family have developed a “pattern of assurance followed by inaction” that has thwarted numerous efforts to find a buyer.

The Austrian businessman’s November 5, 2015, affidavit, filed in relation to the latest legal battle tearing apart their co-GBPA owner, the Hayward family, also alleges that the St Georges are in “potential breach” of the settlement agreement that ended the 2006-2010 litigation between the two families.

This, Mr Babak says, stipulated that the St George and Hayward families must “work together” to sell 100 per cent of their interests in Intercontinental Diversified Corporation (IDC), the company that owns the GBPA and its Port Group Ltd affiliate.

His affidavit implies that the St George family is not meeting this obligation due to its seeming reluctance to assist, and engage in, efforts to find a buyer for the GBPA - an entity whose ownership is split 50/50 between themselves and the Haywards.

Mr Babak alleged that following settlement of the GBPA ownership dispute in 2010, there were “numerous attempts” to try and arrange a purchase, but “it was just not possible to get a sale over the line”.

“This was in large part because we experienced quite a lot of resistance from the St Georges, who seemed to find ways to slow down any discussions about selling the whole of IDC, whether in preventing up-to-date accounts being shared with potentially interested parties or being slow in signing non-disclosure agreements,” Mr babak alleged.

Detailing the Carlyle Group’s potential interest in acquiring the GBPA, Mr Babak said the Washington D.C.-based asset manager was approached in March 2015 - before BlackRock, the larger $4.5 trillion private equity firm, came on the scene.

The Carlyle move, he added, occurred after the late Sir Jack Hayward’s companion, Patti Bloom, said her brother-in-law, Richard Hufnagal, knew an investment banker who could help the family sell its 50 per cent GBPA equity interest.

The banker, John Thomas of Doonbeg, by March 11 had created a ‘draft teaser’ designed to attract potential purchaser.

The document gave $200 million as the purchase price being sought for 100 per cent of IDC (really the GBPA and Port Group Ltd), and suggested that “the St Georges appeared to be reluctant sellers but would have to sell because of the terms of the settlement agreement [with the Haywards] and potential pressure from the Bahamian government (which does not want either the Hayward or St George families to continue to have an interest in the Port Authority”.

Mr Babak said Mr Thomas sent the ‘teaser’ to Carlyle and other likely GBPA buyers, including the Carlyle Group, and others such as Fortress Investment Group.

Despite concern that the St Georges might make “selling 100 per cent of IDC difficult”, Mr Babak recalled approving an e-mail that Mr Thomas sent to Carlyle in a bid to ignite their interest.

“On April 14, 2015, John Thomas suggested that David Stonehill of Carlyle wanted to meet with John and me to discuss possible sale of IDC (or part of it),” Mr Babak alleged.

“As a result of that meeting, Carlyle sent through a letter confirming their interest and a proposed Non-Disclosure Agreement (NDA). I met with Carlyle, with John Thomas, later that week on April 17, 2015.

“I told Patti Bloom about this meeting on April 18. In the end, it proved difficult to move forward because Sarah St George stalled on providing Carlyle with the necessary financials for them to assess the deal. She did eventually provide a hard-copy bundle of old financial statements, but not up-to-date management accounts.”

Mr Babak’s evidence potentially threatens to open ‘old wounds’ and divisions between himself and the St Georges, which in turn could disrupt Board and governance harmony within the GBPA and Port Group Ltd - as the Austrian is still on the Board for both.

It also confirms that the Port Authority’s two shareholding families are divided in their plans and long-term intentions, with the Hayward camp (despite their current divisions) seemingly in favour of selling their 50 per cent stake. The St Georges, or at least some of them, seem reluctant to exit despite growing pressures - not least from the Government - for them to do so.

None of this is positive for Freeport’s future growth and development, especially given the Government’s deliberations on both the Hawksbill Creek Agreement’s future and the currently-expiring tax incentives.

Mr Babak alleged that a May 4, 2015, meeting between Sarah and Henry St George, and attorney Andre Feldman and Patti Bloom’s son-in-law, showed “the difficult state of the relationship with the St Georges”.

He said Mr Feldman had emphasised the importance of complying with the settlement agreement’s terms, namely the obligation of both families to work together to sell 100 per cent of the GBPA and Port Group Ltd.

While the St Georges agreed with that, Mr Babak said Mr Feldman informed him that Sarah St George “wanted to avoid entirely” hiring an investment bank to market the two companies.

“This pattern of assurance followed by inaction is typical of the way the St Georges have behaved, and the delicate balance we have to strike in keeping negotiations going with potential purchasers while protecting the [Hayward] trust in relation to potential breaches of the settlement agreement by the St Georges,” Mr Babak alleged.

Ultimately, by the end of May 2015, Carlyle decided not to proceed with its GBPA interest. Mr Babak said he discussed this with Ms Bloom’s brother-in-law, Mr Hufnagal.

He added: “In that same call, Dick and I also discussed the difficulties we had encountered in trying to obtain financial information about IDC and its subsidiaries, which was preventing us from following up with Carlyle; this made it difficult to negotiate with Carlyle, and ended in Carlyle not going ahead without giving an exact reason.”

Mr Feldman, in his own November 5, 2015, affidavit confirmed Carlyle’s interest in acquiring the GBPA. Referring to the BlackRock deal, he added: “Other buyers were interested at that time, most notably the Carlyle Group (another asset manager with $193 billion of assets).”

Carlyle, which has now grown to $203 billion in assets under management, has 48 offices and 1,700 employees worldwide - making it one of the globe’s major private equity players.

Its connections to high-ranking players in the US Republican Party, including the two former presidents Bush and their family, plus the likes of former treasury secretary and secretary of state, James Baker, has attracted frequent media coverage.