Left: Businessman Donovan Lewis owns 60 per cent of Salada and has made a mandatory bid for the remaining shares. The Salada board has advised shareholders to reject the offer.Right: Mountain Peak coffee, a Salada brand. The coffee company is at the centre of two rival bids. Managing director John Rosen said the directors will soon advise shareholders on the Mayberry offer. - File photos

The directors of Salada Foods Limited advised shareholders of the stock on Wednesday against taking up Three Bears Limited's recent mandatory offer to purchase the remaining 39.77 per cent of ordinary stock units.

The Board members rejected the offer on the bases that the offer price was too heavily discounted and that the sale of a large block of shares which could no the ownership structure, would drive down the price of the stock.

The Three Bears offer opened up for acceptance on September 7 and closes on September 28.

The Three Bears offer price of $25.82 is $14.18 below the trading value of $40 at market close Thursday.

Prior to the offer, the stock was trading at $45.

"Based on the foregoing, your directors do not recommend acceptance of the offer," said the directors circular signed by Bevon Francis, Michael bernard, Eleanor Brown, Jeffrey Cobham, Oliver Holmes and John Rosen.

The board's recommendation would have little effect on Three Bears, whose principal Donovan Lewis, has said he has no interest in acquiring additional shares and made the offer only because the stock exchange rules require it.

Lewis owns 60.23 per cent of the Salada shares. His holdings were boosted after he acquired Three Bears from Caribbean Investment Fund.

More shares transferred

The CIF subsequently transferred another block of Salada shares to Three Bears, giving Lewis more than 6.2 million of Salada's issued shares.

The deals cost Lewis $100 million, which equated to about $24.56 per share, and gave him majority control of the coffee company.

The $25.82 price offered to minority interest by Three Bears was said to be an average of the transaction price and $27.08, the price at which the block transfer was put though on the stock exchange.

Under JSE rules, a block transfer should be priced at a margin of five per cent more or less the last sale price which at the time last year was $28.50.

Based on the five per cent margin the block transfer was put through at the lower price of $27.08 per stock uni Three Bears had agreed on paying $24.56 per unit for the sale and transfer.

The acquisition triggered a mandatory takeover bid.

Less than two weeks after, Mayberry Investments Limited also made a takeover bid for Salada, of $32.50 per share, or some $6.68 cents more than Mr. Lewis' offer.

Salada declined comment on its position regarding the Mayberry offer, which up to yesterday was $7.50 cents belowthe trading price.

"There will be another circular out regarding Mayberry," said Rosen, the managing director.

susan.gordon@gleanerjm.com