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GOJ’s Sale of 59.81% Shareholding in Pegasus Hotels of Jamaica Limited (PHJL)

The Urban Development Corporation and the Development Bank of Jamaica wish to set the record straight with respect to the sale of the government’s majority share in the Pegasus Hotel of Jamaica Limited (PHJL). It is necessary to do this given certain statements made recently in the public media. In this regard, the institutions set out below the process that was followed for the divestment of the shares.

In 2008, the Minister with responsibility for the Urban Development Corporation (UDC) mandated the agency to return to its core functions as established under the UDC Act of 1968 (i.e., to carry on the business of planning and development of designated areas in various parts of Jamaica). In compliance with this mandate, UDC was required to; among other things divest itself of its non-core assets, the proceeds of which would be used to finance its operations on an ongoing basis.

In March 2008, the UDC approached the Development Bank of Jamaica Limited (DBJ) with a view to establishing an arrangement whereby DBJ would, as part of its mandate as the government’s divestment agency, oversee the divestment of specific non-core assets of the UDC. Subsequently a UDC Enterprise Team (UDCET) was established to provide general oversight of the privatisation of the UDC assets.

The DBJ, the Secretariat to the UDC Enterprise Team, supervised the sale of the shares in PHJL and in December 2008 retained Scotia DBG Investments Ltd., by way of competitive tender, to provide brokerage and advisory services relating to the identification of the most appropriate time and method of disposing of the shares, in light of PHJL being a publicly listed company. Scotia DBG Investments also engaged a legal consultant to guide the UDC Enterprise Team on legal matters related to the divestment.

The sale of the shares was undertaken by way of a competitive bidding process which began in August 2009, and was executed in three (3) stages: (i) Request for Expressions of Interest (ii) Pre-Qualification and (iii) Request for Bid Proposals.

Advertisements were published in local and regional media and international hotel trade publications over the period August 2009 to September 2009 inviting interested parties to submit Expressions of Interest regarding this investment opportunity. A total of twelve (12) Expressions of Interest were received. Shortly thereafter, a prequalification exercise was undertaken, with the parties expressing interest being asked to submit financial and other relevant information which was evaluated for prequalification.

By the deadline date of March 15, 2010 submissions were received from four (4) candidates. These 4 candidates were pre-qualified, namely:

  1.     First Jamaica Investments Limited
  2.     Kevin Hendrickson
  3.     John Issa
  4.     Worldwide Opportunity Fund

Prequalified parties wishing to bid for the shares were allowed to carry out due diligence work and were required to submit bid(s) as per the prescribed manner outlined in the Information Memorandum, by July 19, 2010. Of the 4 prequalified candidates, only one (1) bid (from Kevin Hendrickson) was received by the Government of Jamaica on July 19, 2010.

Scotia DBG Investments Ltd evaluated the bid proposal and indicated that the bid price was fair.

The Office of the Contractor-General (OCG) monitored this privatisation transaction from its inception. The OCG reviewed the process and advised, by letter dated August 18, 2010 that “the overall propriety of the transaction and its consequent final result was not compromised.”

On August 19, 2010 the UDC’s Board of Directors met and unanimously approved the acceptance of the bid submitted by Kevin Hendrickson. On August 30, 2010 Cabinet approved the bid received from Kevin Hendrickson.

In September 2010, an agreement was signed between National and Hotels Properties Limited (NHP), a wholly-owned subsidiary of the Urban Development Corporation Limited (UDC), and hotelier Mr. Kevin Hendrickson for the sale of 71,865,384 ordinary stocks units or 59.81% of the shares held by the NHP in Pegasus Hotels of Jamaica Limited (PHJL) for the amount of US$11 million (approximately J$947,639,000). The sale was concluded on December 8, 2010.