Wed | Feb 26, 2020

JMMB buying stake in Sagicor Financial in US$200m deal

Published:Friday | May 17, 2019 | 12:33 AM
Keith Duncan, CEO of JMMB Group Limited.

JMMB Group is pumping US$200 million into the company that is buying Sagicor Financial Corporation, a deal that will see the Jamaican financial conglomerate ending up with indirect ownership in the largest insurance conglomerate in its home market.

Sagicor Financial is the parent company for Sagicor Group Jamaica, the iconic insurance company that was once known as Life of Jamaica.

The announcement regarding JMMB’s deal with Alignvest comes two weeks ahead of a vote set for Barbados on June 4 for Sagicor Financial shareholders to vote their approval of a restructuring plan that will set the stage for its acquisition by Alignvest.

JMMB Group is taking a stake in Toronto-listed Alignvest Acquisition ll Corporation, the vehicle to be used for the acquisition of Sagicor Financial in a deal worth US$536 million – a price that Alignvest had previously described as a substantial discount on the company’s value. At the quarter ending March, Sagicor Financial’s shareholder equity topped US$640 million.

Under the deal, which is subject to regulatory approval, JMMB is expected to end up with “no less than 20 per cent” of the new Sagicor, a Barbados-based insurance conglomerate.

Alignvest also announced financing deals last week with two New York-based investors – KGT Investments, known as Highgate; and HG Vora Investments – which will broaden the extra-regional ownership of ‘New Sagicor’ even further.

JMMB Group, which has businesses in Jamaica, Trinidad & Tobago and Dominican Republic, sees the investment in Alignvest as a way to broaden its market reach in the Caribbean asset management and insurance markets. It already has a presence in the general insurance market in Jamaica but as a brokerage.

Sagicor Financial operates in the Caribbean as well as the United States, with Jamaica being one of its top markets. Its Jamaican operation, Sagicor Group, is led by Christopher Zacca as CEO and Richard Byles as chairman.

JMMB Group’s Alignvest investment translates to $27.2 billion investment in local currency.

“As a pioneering financial institution, we are always seeking out opportunities that will add value to our stakeholders. In that vein, we are confident that having such a stake in a regional market leader will auger well for the future growth and financial performance of the JMMB Group,” said JMMB Group CEO Keith Duncan in a press statement.

The company, which has a cash pile of $24 billion, told the Financial Gleaner it would finance the acquisition with a mixture of cash and debt.

“While the investment is significant, relative to JMMB’s equity market capitalisation, it will represent approximately 10 per cent of JMMB’s total liquid security portfolio, and JMMB has abundant flexibility to reposition its balance sheet, to free up liquidity,” JMMB said via email.

The group holds equity of $25 billion.

In both the JMMB Group and New York deals, Alignvest will issue Class B shares, which holds less voting rights, to the three companies, which will convert to ordinary Class A shares with equal voting rights in the new Alignvest entity listed on the Toronto Stock Exchange, which will include the Sagicor assets.

The Highgate and HG Vora investments amount to US$120 million.

Highgate, a fully integrated real estate investment, management, and development company, has been working closely alongside Alignvest since its initial public offering in Canada. HG Vora Capital Management LLC is an investment firm with approximately US$5 billion in assets under management. “Together with the previously secured commitments from certain of Alignvest investors for CDN$113 million in forward purchase commitments and for CDN$50 million from Alignvest’s placement of Class B shares announced in November 2018, the new subscription allows Alignvest to satisfy the minimum cash condition of US$220 million, after expenses, for the transaction,” Alignvest said.