Government and Clico have decided to sell the local insurance company’s entire 56.53 per cent shareholding in Methanol Holdings (International) Ltd (MHIL), the Oman-based methanol producer, to Switzerland-headquartered petrochemical giant Proman Group for the sum of US$347 million ($2.35 billion), sources told Guardian Media yesterday.
The decision by the parties to sell the block of shares to Proman, which is the minority 43.47 per cent owner of MHIL, appears to be a reversal of the Government’s position to acquire shares in MHIL, for itself and for the National Investment Fund Holding Company (NIF) with the balance to be held by Clico. NIF is a wholly State-owned entity.
On April 25, 2023, in a motion on the adjournment brought by Opposition Senator, Wade Mark, Minister in the Ministry of Finance, Brian Manning, told the Senate that Government had accepted an offer from Clico on January 9, 2023, to purchase 19.63 per cent of the insurance company’s shareholding in MHIL. The offer was accepted by Government at the valuation price as part of the reduction of Clico’s debt owed to the Government.
Manning said on February 21, 2023, NIF accepted an offer from Clico to acquire 17 per cent of its shareholding in MHIL at the valuation price.
Clico would have retained 19.9 per cent of MHIL, which is the maximum percentage holding permitted by the Insurance Act of 2018.
According to Manning’s April 25, 2023, Senate statement, “To date, Clico has signed share acquisition agreements and share transfer forms with the Government of the Republic of Trinidad and Tobago and NIF, but the share register of MHIL has not yet been amended to reflect the transfers.”
Prime Minister responds
In a response to a question from the Guardian Media yesterday, Prime Minister Dr Keith Rowley hinted that the sale of the shares to Proman may be part of a larger strategy to promote investment in the energy sector.
Asked if he was aware that an agreement was reached last week to sell Clico’s shares in MHIL to Proman, and whether the transaction was part of an omnibus agreement with the Swiss company, Dr Rowley said, “I am aware and supportive of the wider strategy of the Minister of Finance to foster and encourage sustained investment in Trinidad and Tobago.”
Contacted on Christmas Day, a Switzerland-based spokesperson for Proman said the petrochemical company would not be commenting on its purchase of shares in MHIL.
History of sale attempts
In its December 2022 report to the Central Bank, Clico outlined that two previous attempts were made to sell its MHIL shares. The first offer was made to Consolidated Energy Ltd, the Proman subsidiary, which has the right of first refusal to shares, in accordance with the shareholders’ agreement that set up MHIL.
The second attempt to sell the shares, according to the report to the Central Bank, was withdrawn by both Clico and the liquidators of CL Financial in 2018.
More than four years ago, in his presentation of the 2020 budget on October 7, 2019, Minister of Finance, Colm Imbert, strongly suggested that MHIL shares would be part of NIF 2.
“Barring unforeseen circumstances, I propose to introduce in fiscal 2020 a second National Investment Fund bond issue which will be based, among other things, on the proceeds from the sale of certain shares held by Clico that are currently valued at $2.6 billion,” said Imbert.
Although he did not mention MHIL by name, the company was the only one of Clico’s assets that was valued at close to $2.6 billion in 2019. Clico’s 56.53 per cent of MHIL was, in fact, valued at $2.58 billion in its 2019 annual report.
Asked at a news conference on August 9, 2023, whether the MHIL shares were still part of his thinking with regard to NIF 2, Imbert said, “Not at this time,” explaining that “there is a lot of confusion over the sale of those shares and I would not want the shares to be tied up. Anything to do with NIF, I would not want to be tied up in any sort of controversy. We are going to use other shares to back NIF 2. For example, we have some additional Republic Bank shares that we are going to give to NIF and there are some other blue-chip assets that would be used to back NIF 2.”
At the news conference, Imbert alerted the public to his plan to bring NIF 2 by the end of December 2023.
The sale of Clico’s shares in MHIL is expected to result in the insurance company fully and finally repaying its debt to the Government for the 2009 bailout. At a news conference on December 6, 2022, former executive chair of Clico, Claire Gomez-Miller, put the company’s debt to the Government at $1.068 billion, which she said would have been repaid from the sale of the MHIL shares.
Valuation of Clico’s stake in MHIL
In its audited financial report for the financial year ended December 2022, Clico stated that it determined the fair value of its shareholding in MHIL using a combination of both the income and the market approaches.
The insurance company said both approaches were prepared using inputs specific to each to establish ‘low’, ‘mid’, and ‘high’ implied enterprise values for each approach. The resulting mid value using the valuation method resulted in a “reasonable” value for Clico’s shareholding in MHIL of US$337 million.
Guardian Media understands that US$337 million was the initial price that Proman was willing to pay, but the company was convinced by the intervention of the Ministry of Finance technocrats to add an additional US$10 million, which resulted in the final sale price of US$347 million.