Monday, March 27, 2006

ThinkGhana and The Guinness "Merger" - The Rejoinder


We wish to invoke our constitutionally guaranteed right to a rejoinder in respect of an article captioned “ThinkGhana and the Guinness Merger”, which appeared in the business column of your highly esteemed newspaper on Monday, February 13, 2006. We do on the presumption that we are not responding to an article from a ghost.

We are deeply distressed by the continuing assault on the collective intelligence of all Ghanaians by the consistent false information that is being peddled by the same public institutions and individuals who have a duty to prevent such occurrences. In normal times, this rejoinder should have been forwarded by the Securities and Exchange Commission (SEC) or the Ghana Stock Exchange (GSE). It has however become increasingly clear that neither the SEC nor the GSE would act to correct the infringement of our securities laws by Guinness Ghana Breweries Ltd. (GGBL). It is in this light that we are compelled to once again attempt to clarify the issues so that the continuing assault on the Ghana’s credibility as an investment destination would be corrected, if at all.

We wish to state categorically that there has been no merger between the then Guinness Ghana Ltd. and GBL to form GGBL. GBL still exists! The writer of that article, Mr. Edward Quartey, conveniently refers to the transaction as a merger. We encourage all journalists to contact the SEC or the GSE and ask this simple question: “Has there been a merger between GBL and GGBL to form GGBL?” Depending on the position and the knowledge wielded by the officer responding, there will be applicable sanctions under Ghanaian law for the answer given. The rather bizarre situation is that a corporate entity that frankly ought to know better and does indeed know better, is consistently evidencing scant regard for our laws, institutions and people and is acting on the presumption that all Ghanaians are unaware of the breaches that have occurred. ThinkGhana is in receipt of a fax from the same entity, on the letterhead of an entity called Guinness Ghana Breweries Group (GGBG). By definition, ‘Group’ denotes more than one company. A merger should by definition necessarily mean only one entity existing after the process. At the bottom of the same letterhead is a statement that “Ghana Breweries Ltd. and Guinness Ghana Breweries Limited are members of the Guinness Ghana Breweries Group of Companies”. Your columnist states inter alia, that he is surprised at the litany of complaints so long after the merger has been completed and the resultant entity had begun operating under its new name and corporate branding. We expect GGBL to publish a rejoinder to that as they should take strong objection to the false information put out by the Graphic columnist. In the Annual Report of GGBG 2004, the Chairman of GGBG states as follows on page 8: “Following completion of the transaction, Guinness Ghana Limited changed its name to Guinness Ghana Breweries Limited”. He states further that “since then, both companies have been working hard to merge the operating businesses of former Guinness Ghana Ltd. and Ghana Breweries Ltd”. According to the said statement, “the businesses have been operating under the name of Guinness Ghana Breweries Group to help the sense of unity that is being built between the two companies. However, I would like to ensure that you are all clear that: Both Guinness Ghana Breweries Limited and Ghana Breweries Ltd. continue to exist as stand alone entities”, end of quote! So one would expect that after such a publication in the Annual Report for an AGM that was held only last December 2005, GGBL would be the entity that should be writing a rejoinder to correct the entirely false impression created by the Graphic columnist. The MD of GBL is also the MD of GGBL. If there has been a merger, would he hold both positions? GGBL is just the old entity, GGL, which changed its name into that of the intended merged entity, GGBL and has consistently worked to promote the wrong impression in the minds of all Ghanaians that GGBL is the merged entity. We therefore reiterate that in normal times, if I were the MD of GGBL and I found my picture in a newspaper article strongly advocating that there has been a merger when I am fully aware that there has not, I will be instructing a rejoinder to correct that misinformation. Indeed, under Ghanaian law, the SEC, GSE and GGBL have a legal duty to as a mater of urgency, immediately correct the false information which evinces a brazen lack of respect for our laws and to halt the impunity with which our securities laws are being breached.

These facts are germane to the matter:
a. In June 2003, GBL completed a capital restructuring programme.
b. In December 2003, Heineken and Diageo, the parents of the Ghanaian entities, announced a deal to acquire Heineken’s stake in GBL triggering a takeover under the GSE Rules.
c. Guinness was obliged to file its first quarter results 2003 by October 2004. It was never filed. Till date, it has not been filed. This is a clear breach of LI 1728. The penalty is two million cedis for each day the default remains. Nothing has been done by the regulators till date.
d. Guinness half-year results for the period were finally released later but it was also an ingenious breach of the rules. Guinness used the old format instead of the stipulated format under LI 1728. That implied that a condensed financial statement was produced instead of a separate balance sheet, profit and loss account and cash flow statement as required by law. Again, the regulators allowed it to pass! Was it an attempt to prevent disclosure of the true financial state of Guinness in the lead up to the takeover? This would only be known if the SEC suddenly wakes up to its responsibilities under law and decides to investigate the acquisition.
e. No valuation report was submitted to the GSE or SEC. The GSE has no discretion in this matter. The GSE’s own Listing Regulations require it to demand a copy of the valuation report. Again, it was never demanded by the regulators and never submitted.
f. Between January 1, 2004 and March 31, 2004, GGBL share prices increased by approximately 65% (that is within three months of the announcement of its merger with GBL) whilst GBL increased within the same period by approximately 19%. GBL’s share price on the date of the announcement of the deal (December 17, 2003) was ¢1425 and rose to ¢1700 by March 31, 2004. GGBL was trading at ¢5400 on the date of the announcement. By March 31, 2004, it was priced at ¢9360. On any other market, the regulator would investigate to assure itself that all was well. Is Ghana any different? We think not.
g. False reports have been made to the GSE and the SEC in clear breach of the law. Guinness sent a press release to the GSE in 2005 stating that the merger was achieved in December 2004. This is false and a breach of the Securities Industry Law, 1993. Nothing has been done till date. Regrettably, the SEC itself has repeated these false and untrue statements in official communication to ThinkGhana. The Daily Graphic itself carried a report of the launch of a corporate entity and logo of GGBG on October 13, 2005. It was all part of the grand deception. GGBG does not exist in law. It has not even been registered with the Registrar-General’s Dept. in contravention of the Registration of Business Names Act, 1962 (Act 151).

So ThinkGhana will ask: Has Ghana’s parliament granted Guinness immunity from Ghanaian law? The deal created a virtual monopoly in the breweries industry in Ghana. Have we created a behemoth that frightens off everyone? We are still investigating the reasons behind what has petrified almost all our institutions into inaction in respect of this matter.

Sour grapes?

We have set this segment out for special reasons. In this dear nation of ours, anytime an issue is raised and people cannot answer on the facts or the law, the easiest option is to attack the integrity of individuals. We take the opportunity to inform Mr. Edward Quartey that on January 24, 2006, we forwarded an 8-page detailed response annexing a 15-page appendix to the SEC. It is instructive on the matters raised. We are ever ready to forward a copy of that communication to you. We believe that you will become an advocate of ThinkGhana after perusing that communication. We think that Guinness itself and its patrons would marvel at the extent to which we would go to defend the indefensible for their sakes when in their own countries, they were duly penalized when these same activities were carried out.

We have pointed out to the SEC and we repeat same here:

“The undersigned’s role
Your reference to the undersigned as having “occupied a key position in one of the companies that was a party to the merger” is also factually inaccurate. We find such statements, from no less an entity than the securities regulator as unfortunate and symptomatic of the obvious lack of effort on the SEC’s part to appreciate the whole process of acquisition that it had approved itself. Once again, we wish to point out that the acquisition process was not a merger but a takeover. All the documentation on the process would obviously be lodged with the SEC by GGBL. The undersigned worked with GBL as its Company Secretary/Legal Adviser during the period. Prior to that, he had been with the GSE for six years, three of which he was the Legal Adviser. With this background in securities law, the undersigned is better placed than most to speak to the self-same issues that the SEC refuses to even acknowledge. GBL was the acquired entity, that is, the Offeree. As the SEC is doubtless aware, the acquisition was triggered by an agreement between Heineken International BV and Diageo Plc for the sale of Heineken’s stake in GBL to Diageo. The SEC is fully aware that at all times, GGBL and Diageo were the main actors in the process with Heineken. The deal was done offshore. GBL’s responsibility as the Offeree was to protect the interests of its shareholders and insulate the Board from potential pitfalls arising from the transaction. The role of the undersigned was to help the Board achieve that objective. The GBL Board as far as the undersigned is concerned, took steps that all other actors in the process should have taken. Did they take all the legal advice that was on offer? When the SEC makes a decision not to investigate such a serious matter, it obviously disables itself from determining what roles individuals played and how decisions were taken from the GBL perspective. Obviously, the undersigned cannot be privy to what was happening on the Offeror’s side, which is the issue that must engage the SEC’s attention.

The opportunity is also taken to stress that the SEC should encourage even people who may have committed infractions of its own rules to come forward with information if it would lead to the advancement and growth of our young securities market”.

If Mr. Quartey would be kind enough to request all the memoranda that the undersigned forwarded both to the former Board of GBL and to the present MD of GBL himself, he will be greatly instructed. ThinkGhana was established precisely to offer sanctuary to people who would want to do right by this great nation of ours but are consistently intimidated into silence and inaction.

In order to highlight the “illegality” of the ‘show-me evidence’ syndrome which has infected the securities regulators, ThinkGhana has requested specified documents from GGBG and GSE. GGBG has indicated that they are seeking their solicitors’ opinion on the matter. We will be surprised if they oblige. The GSE however does not have the same leverage under law. We therefore still await access to public information from them.

We wish to point out that we have applied to the Minister of Finance under s140 of PNDCL 333. We patiently await his communication to inform our next steps.

Finally, we cannot help but admit that we are intrigued by the editor’s note to the article. It was, respectfully, completely unnecessary. What it does is to feed a perception that someone is so desperate to keep this matter out of the public domain. We have therefore disregarded that footnote and forwarded this rejoinder to you in the expectation that this rejoinder will be duly published as warranted by Article 162 (6) of the 1992 Constitution. We dare say that until the day all of us as Ghanaians, stop wearing our ignorance with such pride, foreigners will take us for granted and act with impunity, even when they themselves know they are in breach of the law. After all, the good book says, for lack of knowledge, my people perish!

“You can fool some people some of the time
But you can’t fool all the people all the time”.

Yours in the service of Ghana


P/S: This was forwarded to the Daily Graphic newspaper in reaction to an article published in that newspaper. The rejoinder has subsequently been published by the newspaper as required by law.


Post a Comment

<< Home