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Este informe no está disponible en español. CARIBBEAN BUSINESS Business Alert!! Local Legislature Goes Berserk With The Introduction Of Antibusiness Legislation That Would Have Government Bureaucrats Running Your Business By FRANCISCO JAVIER CIMADEVILLA May 27, 2004 The Death Of Free Enterprise New Antitrust And Minimum-Wage Bills Pending In The Legislature Would Almost Put An End To The Free-Enterprise System In Puerto Rico Under the pretense of fostering fair and healthy competition by "moderating the rigors of the free market" and providing "social and economic justice" for our workers, the Puerto Rico Legislature is considering two bills that would strangle local businesses and kill the island’s ability to attract new investment. One bill would require prior governmental approval of most, if not all, mergers, acquisitions, and even expansions by businesses. Violations of the law would trigger harsh monetary fines and prison terms for executives, directors, and shareholders, and could include cancellation of corporate trademarks and trade names, revocation of the certificate of incorporation, and even dissolution of the company. The other bill would give the local labor secretary the authority to examine the books of individual businesses and, if he determined that employees in a particular company are being paid too little relative to the company’s profits, to order that workers’ salaries and fringe benefits be adjusted. By press time Monday, most business leaders consulted had learned of both bills from CARIBBEAN BUSINESS and were virtually unanimous in their assessment that the proposed legislation would deal free enterprise a heavy blow, affecting just about every business in Puerto Rico and seriously hampering the island’s ability to attract new investment in any industry. Puerto Rico Manufacturers Association (PRMA) President Manuel Cidre and Executive Vice President William Riefkohl were dismayed at the Senate’s attempts on both fronts. They said both bills basically would sabotage free enterprise on the island and send a negative message to nonlocal and foreign companies interested in doing business in Puerto Rico. "These laws would generate excessive regulation and create a hostile environment for businesses in Puerto Rico. Paired with the proposed withholding tax on offshore commercial loans’ interest payments and other laws being considered, such as the Consumer Defense Code, Puerto Rico would project itself as a jurisdiction that isn’t business-friendly," said Cidre. "The regulatory impositions created by these bills would burden local businesses to the island’s great disadvantage vis-à-vis other U.S. jurisdictions when it comes to attracting outside investment," said Cirilo Cruz, spokesman for Chamber of Commerce President Hector Mayol and the chamber’s vice president of Technical & Legislative Services. "This is a very serious and outreaching proposal with potential impact on other areas," said Arturo Carrion, executive vice president of the Puerto Rico Bankers Association. "The way they are presented, the bills create undue interference with free and open commercial exchange. The legislative package sets out so many roadblocks that, in essence, it prevents progress." Economic Development & Commerce Secretary Milton Segarra declined to comment for this story. Through spokeswoman Sandra Pomales, however, he said that since the bills are still under discussion in the Legislature, he would prefer to hold any comment until they go through the legislative process. Labor Secretary Frank Zorrilla supports the minimum wage bill, but not in its present form. The antimonopoly bill Earlier this month, Senate President Antonio Fas Alzamora personally introduced Senate Bill 2788, aka the Antitrust Law of the Commonwealth of Puerto Rico, to replace Law 77 of June 25, 1964. The bill incorporates most of the old law’s substantive provisions against monopolies and other anticompetitive business practices in restraint of trade–mostly borrowed from federal antitrust legislation–and goes much further. The bill is clearly intended as a protectionist measure to stop in its tracks the expansion of big-box retailers such as Wal-Mart that have dotted the island’s retail landscape in recent years. In so doing, it casts the net so wide that virtually any expansion of any business of any size is considered suspect and can be interfered with and stopped by government bureaucrats. The introduction to the bill is rife with scary antibusiness rhetoric typical of central-committee edicts in socialist economies. The bill states that notwithstanding the government’s public policy of fostering a freely competitive business environment, recent developments such as the opening of free markets abroad, the globalization of the economy, and the concentration of economic power in a small number of companies have changed the picture in Puerto Rico. According to the bill, "The entry into the market of powerful players has resulted in the disappearance of a great number of companies. The risk this represents for our economy boils down to the concentration of market share in a handful of companies that, exercising their monopolistic power, control the supply of goods and services to the detriment of the consumer and of the economy in general." To tackle the issue, the new law would require prior approval by the justice secretary of any merger, acquisition, or expansion that falls within certain parameters. The parameters, however, are very broad and subject to the determination of government bureaucrats. For example, any merger or acquisition between two companies with a combined market share of 30% or more, or in which the assets of any one of the companies involved exceed $25 million, would require the secretary’s prior approval. According to the 2004 CARIBBEAN BUSINESS Book of Lists, at least 125 locally owned companies have assets totaling $25 million or more, including all banks; most supermarket chains such as Mr. Special; most food & beverage distributors such as V. Suarez; wholesalers such as J.F. Montalvo Cash & Carry; most hospitals such as Hospital Hermanos Melendez; universities such as the Ana G. Mendez University System; most insurance companies, auto distributors, and bargain-priced retailers such as Me Salve; food & beverage manufacturers such as Goya, Holsum, and Cerveceria India; many construction companies and contractors; and pharmacy chains such as El Amal. In the case of expansions, all of the following would also require prior approval: any new commercial establishment of 10,000 square feet or more in a geographic market in which the expanding company already has another commercial establishment; any new commercial establishment larger than the average size of other commercial establishments in the same geographic market; and any new commercial establishment in excess of 90,000 square feet. Right off the bat, the 90,000-square-foot threshold would apply to any big-box retailer such as Wal-Mart (average store size of between 115,000 and 125,000 square feet), Kmart (123,000 square feet at Las Catalinas), Sears (146,000 square feet at Las Catalinas), and, of course, Wal-Mart Supercenters (average 180,000 square feet). Expansions by small businesses would also be covered. Even a small grocer with a store of a mere 10,000 square feet would have to ask the Department of Justice’s permission before opening a second store in the same geographic area. And any business, regardless of size, that wants to open anywhere a store even slightly larger than the average store in that place would also need a permit from the Justice Department. Furthermore, neither the Planning Board, the Regulations & Permits Administration, nor the municipal government would be able to issue a construction, use, or other permit until after the secretary of justice had approved the proposed expansion. While the proposed merger, acquisition, or expansion would have to be approved or denied within 90 days, any person who, directly or indirectly, feels affected by the secretary of justice’s decision to approve a proposed merger, acquisition, or expansion would have the right to challenge that determination in court, which could delay the process indefinitely. Not only the government but also any private person–including, of course, business competitors–would have the right to go to court to seek an injunction to stop any merger, acquisition, or expansion that may have the effect of substantially reducing competition. The door would be wide open for any competitor to obtain an injunction, and then the burden would be on the business that wanted to expand to prove the move wouldn’t tend to create a monopoly. In addition to the Department of Justice’s Office of Monopoly Affairs (OMA), which already exists under current law, the bill would create a Special Antitrust Board–composed of three government officials and four private citizens–to serve as a sort of Blue Ribbon Committee that would assist the OMA and advise on which business expansions to approve. Applications for an OMA permit for a merger, acquisition, or physical expansion would have to contain all relevant information pertaining to the proposed transaction, including the applicant’s long-term development plan. In addition, the OMA would get ample powers under the bill to require additional information from the business, including documentation regarding its production and sales or any other type of information required to determine its economic potential. Before issuing a permit for a proposed merger, acquisition, or expansion, the OMA would be required to hold a public hearing on the matter where all the information submitted would be made available for public scrutiny. The secretary of justice, through the OMA, also would have ample powers to investigate any business–not only those applying for a permit for a proposed transaction–to ensure the purposes of the law are being complied with. Failure to comply with any request for information or testimony would carry fines and prison penalties. Who is behind it? According to legislative sources, the force behind the proposed legislation is Atilano Cordero Badillo, president of the Chamber of Food Marketing, Industry & Distribution and Supermercados Grande, who is personally lobbying for it. In a May 12 letter to legislators, Cordero Badillo made his case for the bill. "The purpose of the proposed statute is, among other things, to avoid the current scenario of global markets and expansion by powerful multinational operations forcing the disappearance of our country’s small businesses such as grocery stores, supermarkets, pharmacies, bakeries, agro businesses, and many others that would confront conditions of unfair competition. This would lead to the excessive concentration in the market of a few companies that would exercise their control to the detriment of the consumer," he wrote. Cordero Badillo told CARIBBEAN BUSINESS that the purpose of modernizing the antitrust law is to bring it up-to-date with the market. "The existing law was created in the 1960s, and the market has changed drastically since then," he said. Cordero Badillo added that besides Senate President Fas Alzamora, who introduced the bill, House Speaker Carlos Vizcarrondo supports it. Signaling the competition Despite its intended purpose, the bill could end up hurting the growth potential of local small and midsize businesses, which would be forced to reveal publicly their expansion strategies. For example, the bill would require any business seeking an expansion permit from the Department of Justice to provide information about its expansion plan to competitors via certified mail and to the public at large through the publication of a summary of the application in a general-circulation newspaper. This would pose a big dilemma for any business, regardless of its size. Merely publishing a note in which a business states it has asked the OMA to evaluate its growth plans–even if the note doesn’t state exactly what those plans are–would sound the alarm to competitors. It wouldn’t be very hard for a competing business to get a general picture of the growth plans. "This process would divulge sensitive and private business information that has traditionally been very protected in the business world," said the Chamber of Commerce’s Cruz. The bill even says that any individual would be able to call on the antitrust board to paralyze a company’s expansion plans and evaluate whether such plans would eventually foster a monopoly. This means that just about anyone–not just a competitor–could stop a company from expanding, at least temporarily. Downplaying the burden on business growth that the new law would impose, Cordero Badillo said companies or individuals petitioning the OMA not to grant a permit would have to present sufficient evidence that, in fact, the expanding company could monopolize the market. However, the bill doesn’t say exactly what that evidence should contain, so the determination would remain subject to the discretion of a bureaucrat. Cordero Badillo also said the board couldn’t take more than 90 days to evaluate the expansion plan’s effect on the market. As noted before, however, the justice secretary’s approval could be challenged in court by virtually anyone, which would delay the process indefinitely. Cordero Badillo explained that the OMA would use the Herfindahl-Hirschman Index–a well-known and commonly accepted indicator of market concentration–as well as Federal Trade Commission guidelines to determine whether a company’s growth plans would constitute a monopoly. According to the bill, the OMA also would have to consider the public policy established under this law, which is excessively broad and ambiguous. "Requiring a certificate from the secretary of justice for the expansion of a business exceeding 10,000 square feet of space is absurd. So, is the requirement that the secretary must issue a certificate before government agencies can issue their construction permits. This is crazy," said economist Vicente Feliciano, managing partner of Advantage Business Consulting. "It just creates more bureaucracy. What does 10,000 square feet of business space have to do with monopoly? That is just too odd," quipped Feliciano. Economist Gustavo Velez, a consultant to House Vice Speaker Ferdinand Perez, sees the Senate’s attempts to create a new antitrust law as a way to protect local retail companies from chain stores that have entered the market (Wal-Mart, Costco) in the past few years. "There is a genuine concern on the part of the Legislature over the power exerted by large retail chain stores in Puerto Rico. The Legislature has discussed several cases of import transactions and the current [antitrust] law doesn’t provide adequate parameters [to deal with the problems]," said Velez. "A new law could adjust to Puerto Rico’s new economic reality and prevent the excessive market share or influence of a large retail entity in the local economy. But antitrust law can’t be restrictive and discourage foreign-capital investment or be too protectionist." Business leaders disagree. "For the PRMA, the attempt to create a new antitrust law would add a new level of bureaucracy in Puerto Rico, once more over-regulating the process," said Riefkohl. "The government is trying to butt into business while businesses are attempting to insert themselves into the global economy. We can’t continue to send this message to companies interested in establishing themselves in Puerto Rico," he added. "Unless these so-called economic development measures are carefully studied and justified, they will cause a dislocation and erect further barriers to the island’s economic development," said Riefkohl. "It is one thing to adopt antimonopoly measures; quite another to regulate the efficiency and success of a company," said Cidre. "Corporations can’t be penalized for their competitiveness and success in business. The criteria based on size in the bill aren’t germane to the purposes of antitrust law." PRMA Legal Affairs Director Manuel Reyes said criteria such as the size of a company are actually counterproductive to antitrust laws. "There is no need for a new antitrust law. There are legislation and regulations already, administered by the Justice Department’s OMA, to deal with antitrust issues," he said. The minimum-wage assault The other bill under consideration by the Legislature, Senate Bill 2771, would strike an even heavier blow to many businesses in Puerto Rico. It would give the government unprecedented power to intervene in the internal affairs of private businesses. In a nutshell, the bill would maintain the current law with respect to the automatic application to Puerto Rico of the federal minimum wage under the federal Fair Labor Standards Act. But it would also give the local secretary of labor the authority to raise workers’ salaries by resurrecting the old industrywide mandatory decrees applicable before Puerto Rico’s adoption in 1995 of the federal minimum wage. According to Chamber of Commerce President Mayol, a good number of those mandatory decrees imposed an unbearable burden on employers, which forced many local and foreign businesses to close and fostered an anti-investment attitude toward Puerto Rico. Furthermore, the secretary could raise wages above the federal minimum not only on an industrywide basis but also company-by-company, something Labor Secretary Zorrilla rejects. In other words, if the secretary and his bureaucrats determine a particular company has the ability to pay higher wages without substantially affecting its work force, production, or business, he could order the company to do so. Zorrilla said that aspect of the bill would have to be amended. For Feliciano, a minimum-wage law that would establish a higher salary level in Puerto Rico than in the States goes against the basic rules of good public policy. "It is bad public policy. One of the major problems of the Puerto Rico economy is the inflexibility of its many local labor laws. Here we are, proposing more labor laws that add inflexibility to our labor market. It just makes a bad problem worse," Feliciano told CARIBBEAN BUSINESS. Feliciano said that like most people, he believes there ought to be a minimum wage, but it should be in tune with Puerto Rico’s economy. The minimum wage under the proposed labor law wouldn’t be, he said. Feliciano recalled that some years ago, the Popular Democratic Party was against implementing the federal minimum wage in Puerto Rico. "Back then, they [the party] said the impact of the implementation of the federal minimum wage here would be lower employment. Because the federal minimum wage hasn’t changed in such a long time, the local economy has been able to adjust to the $5.15 per hour rate," he said. "But to take the leap and request even higher rates than in the States just doesn’t make sense. It is a formula for unemployment." Feliciano suggested that instead of imposing a higher minimum wage, the market should decide the rates on its own. "Let the market set the rates. For example, there is a lot of pressure on nurses. The fact is the market is resorting to higher salaries for nurses because otherwise, we wouldn’t have any, as they are getting paid more stateside," said Feliciano. "Generally, the market takes care of itself." The PRMA also opposes the measure. "I think this is an unfortunate mistake made by the Senate on behalf of Puerto Rico," said Riefkohl. "Puerto Rico is the poorest jurisdiction in the U.S., and there are few states, only about 12 in fact, that have the power to increase minimum wages above federal limits. But residents of those states actually earn double or triple Puerto Rico’s annual per capita income [$11,000]. This bill would open the door for companies to leave the island." Riefkohl recalled that when the Hernandez Colon administration approved a law raising the minimum wage above federal levels, the PRMA opposed it. The PRMA supported the law’s elimination during the Rossello administration’s labor reform. "When we opposed the law raising the minimum wage, the PRMA was anticipating the globalization process and didn’t want to increase operational costs," said Riefkohl. "With a low labor-participation rate and high unemployment overloading our economy, establishing a higher minimum wage is unrealistic. We urge the proponents of this bill to rethink the measure and make sure they aren’t doing a disservice to the economy." CARIBBEAN BUSINESS Associate Editors Jose Carmona and Marialba Martinez and Staff Reporters Joanisabel Gonzalez-Velazquez, Luis Ramos, and Taina Rosa contributed to this story. Fas Alzamora vs. McClintock Flurry of debate over proposed new Antitrust Law By JOANISABEL GONZALEZ-VELAZQUEZ On May 10, the last day to file bills in the Legislature’s current session, Senate President Antonio Fas Alzamora filed Senate Bill 2788 to create a new Puerto Rico Antitrust Law. The bill has been almost unanimously rejected by the business sector. It is also expected to provoke a showdown between pro- and antibusiness legislators. Fas Alzamora told CARIBBEAN BUSINESS the new bill is aimed at guaranteeing free and fair business competition in the wake of globalization and commerce treaties between developed and developing countries worldwide, such as the North America Free Trade Agreement (Nafta), the recently signed U.S.-Central American Free Trade Agreement (Cafta), and the Free Trade Area of the Americas, to go into effect next year. "Although the government has acknowledged the need to keep a healthy economic environment that is driven by free competition and that promotes free entrepreneurship, companies in Puerto Rico face a new scenario… where business expansions have resulted in the closing of a large number of local companies, and the power is in the hands of a small group of firms," said Fas Alzamora. "These factors constitute a serious risk to free competition, increase the risk of antitrust practices, and increase the unemployment rate and the price of products." "We want to prevent large megastores from coming to Puerto Rico and displacing local retailers. Once those multinational chains come and capture the market, they set the prices. Competition between big and small companies is no longer conducted on equal terms," said Fas Alzamora. But New Progressive Party (NPP) Senate Minority Leader Kenneth McClintock lambasted the proposal, claiming it would mean the end of free enterprise in Puerto Rico. He said the bill would become an unbearable barrier for those wanting to do business in Puerto Rico; would represent the end of successful ventures such as franchising; and would discourage external investors from doing business on the island. McClintock regretted that the Popular Democratic Party (PDP) proposed the antitrust bill so near the end of the legislative session. "The coming days will be the riskiest in terms of bill approvals, because I expect the [PDP] majority will try to pass all these proposals without public hearings and without taking the necessary time to evaluate these matters," he said. "This is the kind of bill that supporters of a part-time Legislature would like to get approved, because a part-time lawmaker wouldn’t have the time to analyze and contest complex and sensitive proposals such as these," added McClintock. McClintock argued that imposing too many restrictions on market forces and free competition, other than those that are absolutely necessary to ensure safe business practices, hinders economic development and consumer spending. He will advise the members of the NPP delegation to vote against Fas Alzamora’s proposal. "Right now, because of the large number of permits and authorizations with which companies doing business on the island must comply, locals have access to less than one-quarter of the consumer products available worldwide," he said. "Bill 2788 would take Puerto Rico out of the mainstream in terms of the economy because limiting the growth of entrepreneurship to protect local businesses reduces competition. Competition is necessary to benefit consumers," said McClintock. He noted there are many local companies and businesses in Puerto Rico that are considered big companies, and their market share has been neither questioned nor limited. "This law is a step toward a totalitarian regime. There is no reason for any government to read or gain access to private companies’ books and records, except for tax purposes," said McClintock. He added that there are hundreds of companies with more than $25 million in assets. If they open their books, others will have access to privileged information should the government, an individual, or a competitor question their plans for expansion or acquisition. According to the 2004 CARIBBEAN BUSINESS Book of Lists, there are more than 125 locally owned companies with over $25 million in assets. But there could be several thousand companies in Puerto Rico that aren’t locally owned with assets of more than $25 million. Fas Alzamora said Bill 2788 is the result of 18 months of work. He explained that Senate advisers conducted a comparative study of several antitrust laws in the States and the U.S. Virgin Islands. According to Fas Alzamora, the study revealed that state antitrust laws follow federal antitrust statutes governing anticompetitive practices linked to interstate commerce. He didn’t say, however, if the Legislature analyzed its economic impact on the private sector or how many companies would be affected by the new law. The proposed law wouldn’t apply to government agencies such as the Puerto Rico Electric Power Authority. Fas Alzamora added that cooperatives, labor unions, and nonprofit organizations would also be exempt. He said that for the first time, consumers would have the opportunity to file class-action lawsuits against firms with antitrust practices, and that parties could take their cases directly to the Supreme Court, which would save costs during the legal proceedings. The PDP senator said the local Antitrust Law would be in harmony with the international trade agreements with which Puerto Rico, as part of the U.S., must comply. He also noted that the U.S. Congress didn’t make any amendment to federal antitrust laws after the approval of Nafta in 1993 or of Cafta this year. He said the current local antitrust statute, enacted in 1964, is incomplete since the Justice Department never carried out the order to define the criteria for assessing antitrust practices. Legislators in the Senate and the House of Representatives will have 30 working days to evaluate the 38-page proposal, convoke public hearings, read or listen to the statements from government agencies or members of the private sector, make amendments, and prepare a report to vote on the measure by June 25, the last day they can approve bills. And because this is an election year, the Legislature can’t call for any other legislative session until January 2005. Legal study: Current antitrust law already provides adequate protection By FRANCISCO JAVIER CIMADEVILLA Puerto Rico’s currently applicable antitrust laws are more than adequate to protect the local economy against monopolies and maintain an open and competitive market, according to a legal memorandum prepared by one of Puerto Rico’s top law firms and obtained by CARIBBEAN BUSINESS. Mirroring provisions in federal antitrust laws, Puerto Rico’s current antitrust statute, Law 77 of June 25, 1964, contains prohibitions against a slew of anticompetitive business practices, such as (a) contract, combinations, and conspiracies in restraint of trade; (b) monopolies or intentions to monopolize; and (c) price discrimination. Law 77 also prohibits unfair competition practices. An accompanying regulation issued decades ago by the local Department of Justice’s Office of Monopoly Affairs contains scads of prohibited practices considered unfair competition (Regulation No. VII on Unfair Competition). The law firm’s memo doesn’t explain why the local Justice Department hasn’t used the regulation more aggressively if indeed there is a problem with monopolies in Puerto Rico, as claimed by the bill’s sponsors. According to experts, the fault seems to lie squarely on the shoulders of the Justice Department’s bureaucrats, not on the lack of adequate laws and regulations on the books. Finally, Law 77 expressly prohibits mergers and acquisitions that could restrain competition or tend to create a monopoly. Under the law, the Justice Department can initiate judicial action and apply to the court for an injunction to stop a prohibited merger or acquisition. Unlike the law proposed by Senate Bill 2788, Law 77 doesn’t give a business competitor the right to apply to seek a court injunction to stop a proposed merger, acquisition, or expansion. According to the legal study, this limitation in the current law responds to the pondered judgment of the local Legislature that to allow a competitor to obtain an injunction to stop mergers and acquisitions (and, under the proposed bill, even expansions) would be an obstacle to the island’s economic development. "Contrary to Senate Bill 2788, Law 77 protects mergers and acquisitions from the biased scrutiny of losing competitors in order to protect Puerto Rico’s economic development," concludes the study. Proposed bill would curtail local, outside business investment If enacted, the new local Antitrust Law (Senate Bill 2788) will present serious obstacles to any new investment in Puerto Rico, according to an analysis by a top local law firm obtained by CARIBBEAN BUSINESS. "In terms of external capital investment, the bill creates an unfavorable regulatory climate in Puerto Rico vis-à-vis other U.S. jurisdictions with which we compete to attract investment," reads the study. Puerto Rico is one of only 13 U.S. jurisdictions that currently regulate mergers and acquisitions at the state level. The others are Alaska, Colorado, Hawaii, Idaho, Maine, Mississippi, Nebraska, Nevada, New Jersey, Ohio, Texas, and Washington state. Still, those states don’t require, as would be required in Puerto Rico under the proposed bill, that their government give prior approval to a merger or acquisition. Most states, including major economic jurisdictions with which Puerto Rico competes for investments, such as California, Connecticut, Florida, and New York, don’t regulate mergers and acquisitions at the state level. They choose instead to apply the provisions of federal antitrust law in order to protect consumers against monopolies. Furthermore, there is apparently no precedent in any U.S. jurisdiction for the regulation of business expansions (i.e., by internal growth of a business) under antitrust statutes as provided for in Senate Bill 2788. As an example of the adverse effects that the proposed bill would have on local small and midsize businesses, the legal study points to the recent expansion of shoe retailer Novus. Under the proposed law, Novus, which ranks No. 80 on the 2004 CARIBBEAN BUSINESS list of the Top 400 locally owned companies, with 2002 revenue of $71.08 million, couldn’t carry out its intended acquisition of 27 Shoe Zone stores without prior approval by the local Department of Justice. (See chart below for a list of the major local or local impact mergers and acquisitions since 2002 that would have required approval of local Justice Department bureaucrats under the proposed bill.) "Simply put, Senate Bill 2788 isn’t consistent with the pro-business environment that the government of Puerto Rico, through the Puerto Rico Industrial Development Co., among other agencies, pretends to project in its promotional materials to attract investment to the island," reads the study. Major Local or Local-Impact Mergers & Acquisitions Since 2002 Ranked by CARIBBEAN BUSINESS Completion-Expected Completion Date: Buyer / Seller / Transaction / Transaction Price-Value Dec. 31, 2001: Shell Chemical Ltd. / Sun Oil Company LLC / Acquired Yabucoa refinery / $135 million (estimate) Jan. 1, 2002: Edmundo Rodriguez / Nestor Reyes Inc. / Acquisition of Nestor Reyes Inc. / Over $7 million Feb. 1, 2002: Univision Communications Inc.1 / Raycom Media Inc’s. WLII-WSUR TV / Acquisition of TeleOnce TV stations / $190 millions plus working capital Feb. 1, 2002: Yunque.net, Starbase Communications, and Ahora.net / N/A / Merger to create Ayustar.net / No monetary investment was required March 31, 2002: RJ Reynolds Tobacco Co. / Japan Tobacco International Manufacturing America Inc. / Acquired Japan Tobacco property located in Yabucoa but not the plant operations. RJR restarted operations in Yabucoa in May 13, 2002 and has 50 employees / $6.2 million April 12, 2002: NBC / Telemundo Communications Group Inc. / Acquisition of Spanish-language network including local TV station / $2.7 billion, including $700 million in debt April 26, 2002: Sea Star Line / Holt Group / Acquisition of NPR-Navieras’ assets / $32 million May 3, 2002: Hewlett-Packard / Compaq Computer Corp. / Acquisition of Compaq / $25 billion approximate June 26, 2002: Ivyport Logistical Services Inc. / Swissport International / Acquisition of Swissport Puerto Rico / Undisclosed amount2 July 7, 2002: Enrique Mangual / General Mills Inc. / Acquisition of Productos Kikuet Inc. / Undisclosed amount3 July 30, 2002: Cemex SA / Puerto Rican Cement Co. shareholders / Acquisition of Puerto Rican Cement & subsidiaries / $250 million including, $70 million in debt Aug. 15, 2002: Popular Insurance Inc.-Popular Inc. / Del Nido & Associates / Fusion agreement in which the acquired company retains it’s name as a division of the buyer / Undisclosed amount Sept. 1, 2002: Mar-Coop–Molding / Comar Puerto Rico / Acquisition of plastics plant / $1.95 million4 Nov. 12, 2002: Wal-Mart Corp. / Supermercados Amigo / Acquisition of supermaket chain / $225 million (estimate) Nov. 25, 2002: Mendez & Co. / Carlos Malave / Acquisition transaction that included distribution rights of several product lines and company facilities / Distribution rights for the acquired product lines represent $25 million in estimated annual sales Dec. 1, 2002: Marsh & McLennan Cos. / Saldaña & Associates / Acquisition of Saldaña & Associates / Undisclosed Dec. 13, 2002: Eurobank / Banco Financiero / Asset purchase / $85 million (valued-assets) Dec. 31, 2002: Grupo Gloria / Dean Foods Corp. / Acquisition of Suiza Foods Inc. / $122 million Feb. 27, 2003 / Carlyle Group / CSX Corp. / Acquisition of majority stake CSX Lines now Horizon Lines / $240 million in cash & $60 million in securities April 16, 2003: Pfizer Inc. / Pharmacia Corp. / Acquisition of Pharmacia Corp. / $60 billion July 2003: Nestle Puerto Rico / Payco Foods / Acquisiton of Payco Foods’ Ice Cream Division / $50 million Aug. 15, 2003: DHL / Airborne Inc. / Acquisition of Airborne Inc.’s ground operations / $1.05 billion Oct. 8, 2003: Cooperativa de Seguros Multiples / Royal & Sun Alliance Insurance P.R. Inc. / Acquisition of Royal & Sun Alliance Insurance Co. / $61 million Nov. 3, 2003: Citigroup / Sears Roebuck & Co. / Acquisition of Sears’ credit-card business / $3.6 billion Dec. 31, 2003: Mapfre-Praico Insurance Co. / Canada Life / Acquisition of Canada Life Insurance of P.R. / $7 million Feb. 23, 2004: Fuddruckers dba of Caribbean Investment Group / Uno Chicago Bar & Grill dba of Interfood Corp. / Acquisition of Interfood Corp. / Undisclosed April 22, 2004: V. Suarez & Co.5 / Packers Provision / Acquisition of remaining 2/3 shares of Packers Provision / Estimated at $60 million May 3, 2004: Eurobank / Bank & Trust of Puerto Rico / Acquisition of Bank & Trust / Estimated at less than $ 7 million Scheduled to close by end of May 2004: Connors Bros. Income Fund / Bumble Bee Holdings L.P. / Acquisition of Bumble Bee Holdings L.P. / $385 million Expected to close by the end of June 2004: Castle Harlan Inc. / Oak Hill Capital Partners L.P.6 / Acquisition of Caribbean Restaurants LLC, operator of Burger King chain of 165 restaurants / $340 million Expected to close by midsummer 2004: Novus Inc. / Footstar Inc. / Acquisition of 27 Shoe Zone stores / $5.5 million Expected to close fourth-quarter 2004: Cingular Wireless / AT&T Wireless / Acquisition of AT&T Wireless / $41 billion 1: Univision Communications Inc. signed a contract with Raycom Media to manage WLII and WSUR. Univision’s offer to acquire both television stations expires Dec. 31, 2004. The transaction requires approval of the Federal Communications Commission. 2: In 1997, Swissport International invested $10 million to establish its ground operations at Luis Muñoz Marin International Airport. (CB June 27, 2002) 3: During a press conference held Nov. 5, 2002, Gov. Sila M. Calderon revealed the acquisition of Productos Kikuet required a private investment of $533,000 and the company has a payroll of $3,967,718. 4: Investors agreed to hire Comar employees in exchange for a 50% tax credit on the purchase price. 5: Since 1997, V. Suarez Investments owns 1/3 of Packers Provision. 6: Partnered with Caribbean Restaurants’ management and American Securities Capital Partners to acquire Caribbean Restaurants in 1999. N/A: Not applicable Sources: U.S. Securities & Exchange Commission; company websites; company executives; media reports; and public documents. Research by Inda Rodriguez, Joanisabel Gonzalez & Francis Lopez. This Caribbean Business article appears courtesy of Casiano Communications. or
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