The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The world’s largest asset manager demanded that there be “no bidding war” as a condition for it to enter talks to purchase the Grand Bahama Port Authority (GBPA).

Richard DeVries alleged that this demand by BlackRock, the $4.5 trillion private equity firm, was why he and Ian Barry were not last year entertaining any other offers for the GBPA in their capacity as trustees for the late Sir Jack Hayward’s family trust.

This explanation is designed to rebut concerns raised by Andre Feldman, the trust’s attorney, that the duo were failing to maximise the GBPA and Port Group Ltd’s value by focusing solely on BlackRock to the exclusion of all other potential purchasers.

Mr Feldman, together with ex-GBPA chairman, Hannes Babak, successfully engineered the removal of Mr DeVries and Mr Barry as trustees for the Hayward trust last summer, citing the “silly deals” the pair were negotiating with BlackRock as justification for doing so.

But, blasting back in an affidavit filed with the Supreme Court on Friday, Mr DeVries refuted Mr Feldman’s concerns over the proposed structure and terms of the BlackRock deal.

These included “Mr Barry and I focusing on BlackRock to the exclusion of other buyers ‘interested at that time, most notably the Carlyle Group’”, another private equity firm with more than $200 billion in assets under management.

“However, BlackRock’s condition for entering into negotiations respecting IDC [the holding company for the GBPA and Port group] was they would not negotiate if we had other purchasers bidding,” Mr DeVries alleged, justifying his and Mr Barry’s actions.

The Canadian barrister then quoted BlackRock’s managing director, Matthew Botein, who allegedly told him on April 27, 2015: ‘We will not be involved in a bidding war’.

Mr DeVries’ affidavit is a direct response to allegations levelled against him by Messrs Feldman and Babak, who claimed the terms he and Mr Barry were negotiating with BlackRock were not in the best interests of Sir Jack’s descendants.

Mr Feldman was the attorney for the late Sir Jack Hayward’s family trust and, by extension, Mr DeVries and Mr Barry in their capacity as trustees.

Yet, splitting from his clients, he made clear his concerns about the focus on BlackRock, to the exclusion of all other potential Intercontinental Diversified Corporation (IDC) purchasers, in his own November 5, 2015, affidavit.

“BlackRock is the world’s largest asset manager and one of only a few credible purchasers for a business such as Freeport,” Mr Feldman alleged.

“However, other buyers were interested at that time, most notably Carlyle Group (another asset manager with $193 billion of assets). Other potential purchasers were also approaching IDC, and I had advised the trustees (who agreed) that it was worthwhile pursuing those opportunities too.”

This risked igniting the bidding war that BlackRock was determined to avoid, but Mr Feldman alleged that Mr DeVries was being too heavily influenced by the St George family, the GBPA’s 50 per cent co-owners with the Hayward family, over the asset manager’s offer.

However, Mr DeVries last week described Mr Feldman’s fears that he and Mr Barry were negotiating a ‘bad deal’ with BlackRock as “unfounded”.

Mr Babak had previously alleged that the BlackRock offer a “potential disaster” for both GBPA shareholder families, as it guaranteed they would receive just $37.5 million each.

Rather than a straightforward ‘purchase for cash’, Mr Babak alleged that BlackRock would instead finance the deal via a ‘convertible loan’ equivalent to 50 per cent of the value of IDC.

BlackRock was to pay a minimum of $75 million, and maximum of $150 million, to the Haywards and St Georges after three years, with additional sums dependent on the GBPA and Port Group’s performance over the following three years.

Given the 50/50 ownership split, Mr Babak alleged that these terms meant both the Haywards and St Georges were guaranteed just $37.5 million each.

He based his argument that “this seemed like a low sum” on a 2011 valuation by Morgan Stanley, which said IDC and its Port Group subsidiaries were worth between $166-$224 million. If correct, that means the initial BlackRock deal was up to two-thirds below the GBPA’s true value.

Me DeVries, while conceding that many of Messrs Feldman and Babak’s concerns over the first BlackRock ‘term sheet’ were accurate, alleged that this “would have been rectified in further negotiations”.

“However, Mr Barry and I were allegedly discharged as trustees of the trust before that could happen,” the Canadian barrister alleged.

“When Mr Barry and I were allegedly removed as trustees on May 17, 2015, our negotiations with BlackRock were still in the preliminary stages.... [they had] really just begun.

“Our very first meeting with BlackRock occurred on April 27, 2015, and ended the next morning at about 10am after a departure breakfast,” he added.

“The purpose of this meeting was solely to introduce BlackRock to the assets of GBPA and Port Group Ltd. There was no discussion of specific terms of a potential sale, either at that meeting, or prior to my receipt of a term sheet from BlackRock, which was dated and received on May 5, 2015. I did not review it until the next day.”

Mr DeVries also dismissed Mr Feldman’s claims that he was “acting alone”, and keeping neither himself nor Mr Barry informed of what he was discussing with BlackRock.

“The theme running throughout Mr Feldman’s affidavit relates to his fears surrounding Mr Barry’s and my efforts to further the possible sale of IDC to BlackRock,” Mr DeVries recalled.

“To my knowledge, Mr Feldman never contacted Mr Barry to ask whether I was acting on my own. At no point during the negotiations with BlackRock did I act on my own, nor did I negotiate ‘without consultation’ with Mr Barry.

“In any event, Mr Feldman was fully aware Mr Barry and I had no intention of committing the trust to any sale without first involving all of the beneficiaries of the trust (including the Hayward children),” the Canadian barrister continued.

“We were simply trying to elicit some form of offer that was acceptable to the St George family, and that we could place before the beneficiaries for their consideration.

“In conclusion, if Mr Feldman truly had fears, such fears were unfounded. There was no ‘real threat’ or ‘destructive deal’ that had to be avoided at all costs.”

Mr DeVries described as “disingenuous” the suggestions by Mr Feldman that he and Mr Barry might commit the late Sir Jack’s trust to a GBPA sale without first obtaining both court approvals and a valuation of the Port’s financial worth.

“Mr Feldman had cautioned Mr Barry and me many times that we could not do anything of substance on behalf of the trust without prior court approval,” he said. “As a former attorney, I was aware this was sound legal advice, particularly given the litigious history of the trust.

“In fact, at our introductory meeting with BlackRock on April 27, 2015, I specifically informed Ralph Isham, who was co-ordinating matters between BlackRock and the IDC owners, that any sale of the trust’s assets would require, firstly, involving all the beneficiaries of the trust and, secondly, prior to court approval, support by an appropriate valuation.”

Mr DeVries also dismissed Mr Feldman’s claims that he and Mr Barry did not understand the need to sell 100 per cent of IDC (the GBPA and Port Group Ltd).

He pointed out that the key phrase in the 2010 settlement deal, which ended the long-running legal battle between the Hayward and St George families, was for both sides to “work together” in exiting the GBPA.

Mr DeVries added that other factors, such as BlackRock’s ‘deep pockets’; the difficulties in finding a GBPA buyer to-date; and the Bahamian Government’s “pressing for a new arrangement” due to Freeport’s expiring tax incentives were also factors influencing his and Mr Barry’s approach.

“Mr Barry’s and my goal was to establish all available options in order to identify the best possible opportunity for a sale of IDC within a timeframe responsive to the Government’s desire ‘to secure a comprehensive set of new arrangements’,” Mr DeVries alleged.

“We, like Mr Feldman, had identified BlackRock as that opportunity.”

As for Mr Feldman’s concerns about Mr DeVries allegedly pushing for a non-disclosure agreement (NDA) to be rapidly signed with BlackRock, the latter responded: “I am of the belief that in business and legal matters, responses should be prompt.

“This is just how business should be conducted, and shows respect to one another when dealing with parties, especially parties of significant financial ability, such as BlackRock, who expect great respect. This is the sole reason why I asked for prompt execution of the NDA.”