The public face of Bacardi is the mischievous dancing cat in the ads. The private face is a secretive, family controlled empire that has been accused of plotting to undermine the Castro regime in Cuba and of fuelling a transatlantic trade war. Yesterday, the deeply divided family approved a motion that could eventually lift the lid on Bacardi: for the first time in its 141-year history, outsiders may soon be allowed to buy shares in the world’s biggest rum producer.
In true Bacardi corporate style, this event was not greeted with breezers at sunset. Instead it banned journalists from its shareholder meeting in the tax haven of Bermuda, declined to answer questions and issued a statement of just two paragraphs.
The historic phrase was “the creation, but not the issuance, of two classes of Bacardi Limited common stock”. Issuance will require a separate vote, but approval seems a formality after yesterday’s two thirds majority. It could pave the way for a flotation – probably on the New York Stock Exchange, where Bacardi would be worth about $5bn (οΎ£3.1bn). It is the world’s fourth largest spirits firm, and its other brands include Dewar’s whisky, Martini vermouth and Bombay Sapphire gin.
Yet this is not 21st century corporate governance. The two classes of share will be one for Bacardi family members and another for the rest. The former are likely to carry 10 times the votes of the latter, a measure designed to ensure the 600 or so family members never lose ultimate control.
For the last decade – which has seen the emergence of Bacardi as a global force in the world spirits market with operations in 170 countries – those 600 individuals have owned a lucrative ticket.
Last year the company made operating profits of $734m on sales of $2.7bn and generated post-tax earnings of $444m, helped by a $155m tax refund in Mexico. As Bacardi has grown, shareholders have been able to sit back and collect their winnings – company rules dictate that it must pay out more than half its post-tax profits to shareholders in the form of dividends.
The impetus for change, albeit modest, is chief executive Ruben Rodriguez, the first non-family member to lead the company. He told shareholders that Bacardi needs financial flexibility to keep up with Britain’s Diageo and Allied Domecq in a consolidating spirits industry. Yesterday’s vote in favour is a per sonal triumph for him: when his predecessor called for a float in 1999 he was effectively forced out.
Mr Rodriguez’s chief opponent was Karen T Bacardi-Fallen, a Boston lawyer whose great great grandfather, Don Facundo Bacardi y Maso, was a founder of the business in Cuba. She described the plan as “the newest reincarnation of already defeated proposals put forth by this week’s collection of investment bankers and New York lawyers”. This time it was not enough to scare the rest of the clan.
Identifying the members of the clan, though, is another matter. Bacardi-Fallen, despite leading the “no” lobby, never revealed her own holding and the last time a shareholder list made its way into the public domain was 1996. It showed that 40 trusts and corporations, mostly with post office addresses in Bermuda, the Bahamas and Grand Cayman, held 75% of the shares.
Secrecy seems to have been in the blood of the company since it fled Cuba after Fidel Castro nationalised its assets there in 1959. Some of those secrets were exposed by Cuban journalist Hernando Calvo Ospina in a book last year titled Bacardi: The Hidden War. Mr Ospina alleged that the company’s former head, the late Jose Pepin Bosch, hired an aircraft to bomb Cuba’s oil refineries to create a blackout and encourage subversion. The plan was abandoned when a picture of the aircraft was published in the New York Times.
A few years later, according to CIA documents released in 1998, Mr Bosch offered to contribute $100,000 of the $150,000 requested by people linked to the mafia who had offered to kill Castro, his brother Raul and Che Guevara. Bacardi has maintained that Mr Ospina’s book is “not worth commenting on”.
In recent years, Bacardi family members have contributed to campaigns that led to the 1996 Helms-Burton legislation, which strengthened US trade embargoes against Cuba, and the company itself has been at the centre of a complicated trade dispute over the rights to Havana Club rum, which is produced in Cuba by French group Pernod-Ricard through a joint venture.
The product cannot be sold in the US, but in 1995 Bacardi registered the Havana Club name in the US, saying it had bought the rights from the original pre-revolution Cuban owner, and began producing its own rum under the name. Pernod-Ricard’sinevitable appeal was thrown out by the American courts but provoked a protest from the European Union to the World Trade Organisation. Over in Cuba, Castro threatened to produce his own version of Bacardi “because it is ours”.
The latest round of the Havana Club legal battle centres on Florida governor Jeb Bush, brother of the president. Bacardi, with a US base in Miami, has given $200,000 to Florida Republicans since 1998 and Pernod-Ricard has submitted emails that purport to show that the governor put pressure on local trademark officials to back Bacardi in the dispute.
If yesterday’s vote does indeed lead to a stock market flotation for Bacardi, it should ensure that it is not the cat in the ads or the bat in the logo that dominates the prospectus; it will be the section headed “legal disputes”.
By Nils Pratley, The Guardian Unlimited
