IEC Energy Company Limited, which recently became the majority shareholder of Ciboney Group, has made an offer for the minority shares that’s priced substantially below the former hotel company’s current market price.
Still, the mandatory offer is equal to the price the new owner of Ciboney paid to acquire just over 72 per cent of the shareholdings in what has long been a shell company with no assets.
Owners of the Ciboney stock have until October 6 to decide whether to accept or reject IEC’s proffer of $0.05, which is heavily discounted relative to the $1.12 price at which the stock traded a day before the offer opened.
The stock closed up further at $1.26 on Tuesday, but is trading well off its one-year high of $2 per share. Still, IEC Energy, which paid $19.7 million for its majority stake in Ciboney, has already grown that investment 25 times.
IEC Energy was created by Wiltshire Group as the vehicle to acquire Ciboney. It’s led by energy professional Nigel Davy and businessman Wayne Wray.
IEC Energy was initially owned by Wiltshire Consulting and Advisory Group Limited but was transferred on on June 30, 2023 to Innovative Energy Company Limited, a company registered offshore in St Lucia, the offer document noted. The transfer happened a day after the Ciboney deal closed.
Wray declined to specify what new form Ciboney will take at its rebirth saying he would not comment beyond the general direction indicated in the offer circular.
Among the considerations laid out in the document is the prospect of using Ciboney as the vehicle for a reverse takeover.
In the wake of the acquisition of the 72.11 per cent interest in Ciboney from the Financial Sector Adjustment Company, the stock has tripled in price. Indeed, Wiltshire paid five cents per share for Ciboney at a time when the stock was trading at 67 cents per share.
The disposal was the last bit of substantial business outstanding for Finsac, the bailout company created by government in the mid-1990s to rescue the failing financial sector, and which is just now in the process of being wound up.
Wray said Ciboney’s current market price did not reflect the failed company’s underlying value.
“The stock price is more reflective of its potential” and confidence in the future of the company, he said in an interview with the Financial Gleaner. “Even with some speculation, it is more [reflective of] confidence by many that there is a future plan to generate earnings.”
IEC Energy received an independent accounting opinion on the pricing of the five cent offer, Wray noted. Ciboney operated a failed hotel on the north coast that catered to tourists in the 1990s, and fell into the hands of Finsac when the bailout agency rescued the Eagle Group of companies. Ciboney’s last piece of asset, land held for development in Westmoreland, was sold back in December 2017.
“Existing shareholders should now have a greater expectation that there is a company with an exciting business plan, so their share price will increase in value over time,” Wray said.
In order to avoid the delisting of Ciboney, IEC Energy will reject subscriptions to the offer that take the company beyond the 80 per cent cap on shareholding in a listed firm by a single entity. As such, it will only purchase up to or 7.8878 per cent more of the company, which is equivalent to 43,067,583 additional units, capping its bid at just over $2.15 million.
Those shares, however, are now worth $54 million on the market, suggesting few may take up the offer. Meanwhile Ciboney’s total market capitalisation has climbed to $688 million.
After the mandatory offer process is completed, Ciboney will remain dormant until the directors recapitalise it, according to the offer circular.
“It is anticipated that the board will first ensure that the company is compliant with all obligations as a publicly listed entity, thereafter, determine the capitalisation and appropriate mechanism required to make the business operational based on their strategic planning,” it said.
“The new shareholders are going to recapitalise the company, and put in an operating and profitable business,” Wray added.
Davy is currently the chairman of Ciboney. He is a businessman and energy professional with over three decades in the energy sector. He has developed, financed, constructed and operated over 16 co-generation and energy infrastructure projects in the United States, Central America and the Caribbean, according to the circular. Wray is the managing director of 365 Retail Limited, operator of a TotalEnergies service station, mentor to various companies on the junior stock market, and was once president of First Global Bank.