Mon | Feb 19, 2018

NCB'S powerhouse bid for GHL

Published:Sunday | December 10, 2017 | 12:00 AMSteven Jackson
In this January 27, 2017 file photo, NCB Financial Group Chairman Michael Lee-Chin addresses shareholders of the banking group at a meeting in Kingston. President & CEO Patrick Hylton is at right.
NCB Group headquarters, The Atrium, Trafalgar Road, New Kingston.
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The price of Guardian Holding's stock shot up four per cent in its home market on Friday after Jamaica's largest banking conglomerate NCB Financial Group announced it was seeking to acquire control of the Trinidadian company.

The takeover, if successful, would allow NCB Financial to claim the label of a regional banking powerhouse, but the Jamaican bank would still fall well short of CIBC FirstCaribbean International Bank, which is currently twice its size when measured by assets.

But market analysts say NCB Financial could eclipse Barbados-based Sagicor Financial Corporation, whose core business line, like GHL, is insurance.

NCB Financial is offering US$2.35 per share to buy another 32 per cent or 74.23 million more shares in Guardian Holdings, to grow its stake to 62 per cent. It would cost the bank US$174.44 million (J$22b) at full take up. NCB first acquired 29.99 per cent of the company in May 2016, and its move to increase its stake was widely anticipated by the market.

The current bid price for GHL is the equivalent of about TT$15.98 - a discount on the stock price, which was valued at TT$16.55 before the bid went public. The GHL stock climbed to TT$17.22 on the day of the offer, which remains open to shareholders until January 12. NCB Financial gained nearly three per cent in Kingston to close at $95.46, but did not trade in Port-of-Spain.

The Jamaican bank insists its offer for GHL is being made at a premium, based on the stock's historic prices going back a year.

"NCB has offered to purchase up to a maximum of 62 per cent of GHL shares and the price offered represents a premium to the average trading price of the past 12 months. The bid is not for 100 per cent of the outstanding shares," said Nichole Brackett Walters group marketing and communications manager at NCB Financial in response to Gleaner Business queries.

"We believe that the price offered, in US dollars, is sufficient to result in a successful offer," she said.

NCB Financial's assets are worth about US$5.5 billion, while GHL's is the equivalent of US$4.7 billion. CIBC FirstCaribbean tops them both with assets of US$12.25 billion, but NCB is now in striking distance of Sagicor Financial, which holds around US$6.77 billion of assets.

"The big issue is that they will emerge as a major regional player," said an analyst who requested anonymity. "They will be a big bank and a big insurance company, which will pose a substantial challenge to Sagicor."

NCB Financial already has a presence in various regional markets, but Guardian has a much wider network in 22 countries, including the Dutch Caribbean.

Inside Jamaica, the GHL acquisition is also expected to create ripples throughout the local insurance sector, said the analyst, who noted that it would concentrate four insurance businesses under one group - namely life insurers NCB Insurance and Guardian Life, and general insurers Advantage General Insurance and Guardian General.

"It would become substantially profitable for the NCB group if they can leverage insurance services with the largest branch network in the island. It would create interesting possibilities for other products," the person said.

"Remember, on the general side, AGI dominates motor and Guardian General is big on property."

CEO of Stocks & Securities Limited Mark Croskery raised the prospect that NCB may be positioning for another try at a listing of the bank on the United States market.

"Excellent move by NCB Financial Group in spreading its wings in the Caribbean and the region," said Croskery.

"NCB's prior deal clearly signalled this years ago, with their goal of a US IPO offer, which was shelved. NCB Financial Group has [now] diversified its revenue streams, and assets, based on not only this, but also, Barbados, Cayman and Bermuda expansions ... It seems clear to expect NCB to re-tap the US listing opportunity - maybe in 2018 or onward - as the diversification has now occurred and Jamaica is now a stronger and healthier neighbourhood," he said.

NCB Financial is also in the process of acquiring 50.1 per cent controlling interest in the Clarien Group, owner of the Clarien Bank, in Bermuda.

Majority owner and Chairman of NCB Financial Group Michael Lee-Chin has signalled that the bank's regional expansion programme has more elements to come.

"By leveraging GHL's scale and resources, our regional expansion plans will be accelerated," he said in a statement on the GHL bid.

steven.jackson@gleanerjm.com