The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE Government was last night accused of "turning the clock back 30 years on Bahamian ownership" after it decided not to block the $35 million GB Power buy-out.

The Minnis administration, in a statement yesterday evening, said it had approved the minority investor buy-out by Emera while admitting this was contrary to its goal of creating wealth/ownership opportunities for Bahamians. Explaining its decision, the Government said intervention was "not legally justifiable" given that the buy-out was a private transaction where 96 per cent of Bahamian minority investors had voted in favour of accepting Emera's offer. Describing the deal as one that "in all respects exceeds the requirements of Bahamas company law", the Government said: "One of the stipulations for the proposed transaction included a requirement that 'the majority of the minority' of shareholders should support the proposed shares acquisition. "This threshold was significantly exceeded with the support of 96 per cent of those who voted."

Then, acknowledging the contradiction with the Government's policy, the statement continued: "While the policy of the Government is, and remains, to encourage Bahamian ownership and participation in the domestic economy wherever possible, it was not found to be legally justifiable for the Bahamas Government to intervene in the shareholding transactions between a private company and its shareholders, all of whom had the ability to seek independent counsel and advice."

The Government then moved to dampen any resentment, and sweeten aggrieved Bahamians, by promising it would create ownership opportunities through selling-off its majority 51.75 per cent stake in Aliv. It also promised to subsequently reduce its Bahamas Telecommunications Company (BTC) stake by selling shares to Bahamian investors.

"The Government's commitment to advancing Bahamian ownership and participation in the economy will, in the near future, be further expanded and deepened with the offering of shares to the Bahamian general public and institutional investors in Aliv and, subsequently, in BTC," the Minnis administration promised.

The private placement of the Government's equity in Aliv, the second mobile operator, has been on the drawing board for the best part of a year. Tribune Business reported late last year that all that remained was for the Government to 'pull the trigger', and last night's statement indicates that the Aliv offering to institutional investors may be coming closer to a launch.

However, one Bahamian unlikely to be won over by the Government's Aliv/BTC ownership promises is Fred Smith QC, who last night said he was "appalled and shocked" that the Minnis administration had permitted the GB Power buy-out to be consummated.

The Callenders & Co attorney and partner, who previously launched Judicial Review proceedings seeking to overturn previous government approvals on behalf of his company, SeSaChe, which holds $300,000 worth of shares in BISX-listed ICD Utilities, said he would now have to determine whether to take action against last night's decision.

"I am appalled and shocked at the Government's insensitivity to Bahamian investors," Mr Smith told Tribune Business, adding that the 96 per cent vote in favour of accepting Emera's offer has "got nothing to do with it'.

"That's what individual rights are all about," he added of his Judicial Review. "The approval by the majority of shareholders doesn't necessarily translate into automatic deprivation of the shares of those who did not agree.

"This is not a private law interest I have raised; it is a public policy, public law issue, which is that the Government has committed itself to direct Bahamian participation in domestic industries such as the energy sector.

"That was the whole idea when ICD Utilities was initially created. This is turning the clock back 30 years on direct Bahamian investment."

Branding the Government's approval as "economic treachery", Mr Smith then pledged that he would not give up his Judicial Review without a fight.

"I do not presume to simply give up because the Government has betrayed Bahamian investors in GB Power," he told Tribune Business. "I haven't had the opportunity to consider this approval for Judicial Review in any way.

"It's really, really discouraging that the Government should behave in this way towards Bahamian investors. It's actually quite shocking. And the notion that I must now give up my shares in GB Power so I can buy shares in Aliv and BTC is perverse political thinking."

Emera's stated goal is to simplify GB Power's corporate ownership structure by taking out BISX-listed ICD Utilities, the holding vehicle for a 50 per cent stake in Grand Bahama's utility monopoly, and de-list it from the exchange.

Apart from an all-cash pay-out, Bahamian investors can also elect to retain their indirect GB Power ownership by swapping their ICD Utilities shares for Emera Depository Receipts (BDRs). The latter will be listed on BISX, and these securities will potentially diversify/minimise risk for Bahamian investors since returns will be generated from all Emera's Canadian, US and Caribbean assets - not just GB Power.

The Emera Depository Receipts (DR) will effectively allow Bahamian investors to maintain indirect ownership in GB Power, as they will be a direct replacement for the ICD Utilities shares. The DR option, Emera and its advisers are arguing, also means that Bahamian investors are not being forced to sell.

Despite 96 per cent of minority Bahamian investors voting in favour of the buy-out, the Government delayed final approval of the deal while it completed a final review.

Carl Bethel QC, the Attorney General, subsequently told this newspaper that the Minnis administration wanted to be sure that approving the Emera purchase was "consistent" with previous policy decisions taken when the Canadian utility first bought into GB Power.