The head office of the RJRGleaner Communications Group on Lyndhurst Road in the Corporate Area (Photo: Karl Mclarty)
June 21, 2022
Radio Jamaica increases share offer for 1834 Investments
INVESTORS in 1834 Investments are set to get more shares out of the deal in which the company is to be amalgamated into Radio Jamaica Limited. The announcement of the change was made by 1834 Investments and Radio Jamaica to the Jamaica Stock Exchange (JSE) late Friday.
With the original deal, Radio Jamaica, which is seeking to acquire the investment firm 1834 Investments, proposed on April 22 to pay for the transaction with either shares or cash, or a combination of the two.
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The media entity initially offered to pay $1.29 for each 1834 Investments share. An 1834 Investments shareholder who opted for a stake in Radio Jamaica instead would have received just over 40 shares (o.403125 Radio Jamaica shares for every 1834 Investments shares) in the media entity for every 100 shares held in 1834 Investments. However, with the new proposal that has been in circulation since Friday, Radio Jamaica is now offering approximately 50 of its shares (0.4962 Radio Jamaica shares for every 1834 Investment shares) in exchange for every 100 shares held in 1834 Investments. The amount offered in cash for the shares in 1834 Investments has not changed. The updated proposal means the share offer has been increased by 23 per cent.
Gary Allen, CEO of Radio Jamaica Limited, said the adjustment is to reflect what was happening in the market. “If you look at what has happened since we announced the transaction, the whole market has had a downward movement,” he said, in reference to the five per cent dip in the value of the Main Market of the JSE between April 22 when the proposed takeover was announced and Monday, June 20.
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“When you examine the rate of exchange with the downward movement which happened more in the case of the Radio Jamaica shares than in the case of the 1834 shares… someone looking on could actually decide, well, it’s better for me to take cash and go and buy the Radio Jamaica shares, rather than take the Radio Jamaica shares because of how the market has moved.”
Shares in 1834 Investments have gone up 40 per cent from $0.85 on April 22 to $1.19 on Monday, June 20. The shares have traded within a band of $0.66 to $1.48 in the last 52 weeks. On the other hand, Radio Jamaica shares which were valued at $2.54 on April 22 were valued at $2.47 on June 20, down 2.75 per cent over the period. The company’s shares have traded in a range from $1.60 to $4.78 in the last 52 weeks. The movement in the share prices made the option of taking Radio Jamaica shares less attractive for shareholders of 1834 Investments. This prompted the increase in the number of shares on offer to incentivise the shareholders of 1834 Investments to take Radio Jamaica shares rather than request cash.
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Ahead of releasing the new proposal on Friday, the management of 1834 Investments filed a fixed date claim form in the Supreme Court, seeking to get a date set for an extraordinary general meeting for its shareholders to consider and vote on the proposal. If approved, the amalgamation would see the full takeover of the old Gleaner Company by Radio Jamaica. The process began in 2016, when the media entities owned by the Gleaner Company were split off from the real estate and investment company and renamed the Gleaner Media Company Limited (GMCL), which was then acquired by and merged into Radio Jamaica. The real estate and investment segment of the business was amalgamated into a new firm, 1834 Investments and was relisted on the JSE while the Gleaner Company was delisted. Radio Jamaica, the parent company of Television Jamaica, four radio stations, three cable channels and the Gleaner newspaper, its print operation, remained listed.
Under the deal agreed in 2016, Radio Jamaica leased the premises on North Street, Kingston, which house the GMCL for a fee of $100,000 per year plus maintenance. Allen hinted that that arrangement, which comes to an end in 2031 helped, to influence the push to acquire 1834 Investments.
“This is actually a move to secure the home for the print operations, because in nine years’ time we would have to be looking at, where do we house that massive press, if we are still using that massive press. And if we are still [operating the print business from North Street] ,the consideration is, do we move to pay commercial rental, and is that more advantageous or not,” Allen told the Jamaica Observer. He said the press on which the newspaper is printed takes up a substantial part of three of the five floors at the Gleaner location and would be difficult and expensive to relocate.
1834 Investments has been liquidating its real estate assets in the last few years and making big dividend payments to shareholders. However, because of the contract it had with Radio Jamaica, the building which houses the media entity’s print operations on North Street could not be liquidated.
Allen pointed out that Radio Jamaica’s need to raise funds to finance its strategic plans was also behind the push.
“1834 Investments does have in it, just about $1.2 billion in cash or near cash, and if we can acquire our print home and $1.2 billion using shares in [Radio Jamaica], then if you compare that with going to the market and diluting our shares in a rights issue to try and raise the money, in our view, a share swap arrangement with shareholders of 1834 Investments looks far more attractive for us to raise the money and secure our North Street home as our own rather than go to the market and try to raise funds.”
The company is hoping that shareholders of 1834 Investments lean more towards taking payment for their stake in the form of Radio Jamaica shares.
“We are confident of the business plan and the prospects for our business for the future and we would welcome a complete share swap for the transaction,” Allen told the Business Observer without getting into details about how much of 1834 Investments he hopes to pay for with shares of Radio Jamaica rather than cash.
“However, we know that for various reasons some shareholders will exercise the option of taking cash or some cash and some shares,” he added.
If all 1834 Investments shares are paid for by shares in Radio Jamaica, the media entity will dole out 601 million of its shares in exchange for just over 1.2 billion 1834 Investments shares. Radio Jamaica has over 2.4 billion shares and last year expanded that to 3.6 billion shares to facilitate the transaction. At the same time, the company had applied to the information ministry for approval to increase the maximum percentage of shares which can be held by one person from 10 per cent to 21 per cent.
If the 1834 Investments shareholders, however, hold out for full payment in cash, it would cost Radio Jamaica $1.5 billion, hardly a cost the company wants to face given that it has been in the market to raise $1 billion to build out its digital agenda, including its digital switchover activities which will be “rolled out over the next two to three years”.
Allen says if the shareholders of 1834 Investments vote to approve the deal, then 1834 Investments will be dissolved. “It will no longer be listed on the stock exchange because it would have been acquired by another listed company and the value of Radio Jamaica Limited would increase substantially and the funding of our business plan activity would be secured and we would be able to continue to roll out all the components of our plan. That is, to have a full-service media entity that is based in Jamaica, but will be global in scope and operating on multiple platforms including in many of the digital spaces.”
1834 Investments currently has a market value of $1.4 billion. Radio Jamaica is valued at just under $6 billion by market capitalisation.
ALLEN…this is actually a move to secure the home for the print operations
