MATALON, LEFT and BYLESAl Edwards, Business Co-ordinator
PAN CARIBBEAN Financial Services Ltd. (PCFS) and Manufacturers Investments Ltd. ("MIL"), the parent company of Manufacturers Sigma Merchant Bank Ltd. ("MSMB"), yesterday advised the Jamaica Stock Exchange that they have signed a non-binding Heads of Agreement to merge their respective businesses.
The agreement is subject to final agreement on the relative values of the respective entities, due diligence by both parties, the approval of the relevant regulatory authorities and the Minister of Finance as well as ratification at an extra-ordinary general meeting of the shareholders of PCFS to be held later this year.
WHOLLY-OWNED SUBSIDIARY
For clarity, MIL's wholly-owned subsidiaries involved in the transaction are Manufacturers Sigma Merchant Bank Limited and its subsidiaries and Manufacturers Sigma Investment Management Limited, while PCFS includes its wholly-owned subsidiary, Pan Caribbean Merchant Bank Limited.
This new banking power house would be a strongly capitalised financial services group with equity in excess of $2.25 billion and assets of $35 billion. Richard O. Byles, Chairman of PCFS, noted that the combined entities would achieve a greater scale of operations, allowing them to leverage technology and the best human resources to serve their clients.
"I really believe this merger will be a significant milestone in the development of our financial industry and of considerable benefit to both our stockholders and customers. Both companies are known for delivering high quality service and we expect to raise the bar in the critical areas of service delivery and financial strength."
Joseph M. Matalon, Chairman of MIL, explained: "The merger of Manufacturers and Sigma completed in 2001 has far exceeded our expectations. We have seen the value created from the merger in the services we have been able to provide to our customers. We are now poised to take another very important step. We think that Pan Caribbean will be an excellent partner in our mutual goal to consistently deliver value to our customers".
Both Chairmen issued their commitment to keeping customers informed on the merger. The next two months will see the organisations working to finalise the due diligence exercise as well as to obtain the approval of the regulatory authorities.
This latest news follows Pan-Jam's announcement that it has seen its net profit increase by 80 per cent for the six month ended June 2003 .The insurance and property divisions were the main drivers of this impressive result accounting for 72 per cent of the $362 million in profits.
NET PROFIT
Net profit for the six months totalled $239 million a $106 million increase over the $133 million recorded a year ago. However profit contribution from the banking division slowed considerably in the three months to June 2003 as the high interest rate regime squeezed margins on the fixed rate Government of Jamaica securities portfolio of Pan Caribbean Financial Services, a subsidiary of the Pan-Jam Group.
With the Bank of Jamaica (BoJ) gradually reducing interest rates over the past two months, however, Pan-Jam expects its Financial Services division to t return to high profitability levels. Pan Caribbean Financial Services half year profit fell 19 per cent from $106.4 million to $86.1 million. It also saw an eight cents decline of its Earnings Per Share from 42 cents to 34 cents.
Despite the last few testing months Pan Caribbean Financial Services headed by Donavan Perkins has gone from strength to strength. The institution is well capitalised with over $1 billion in equity. In 1992 it had capital of $14 million, assets of $300 million and profits of $5 million. Today it has assets of $15 billion and profits for 2002 stood at $217 million. Manufacturers Sigma Merhant Bank (MSMB) headed by Peter Melhado audited accounts for the year ended March 2003 show a pre-tax profit of $361 million, a 4.17 per cent increase over the same period last year. MSMB's capital base continues to be strengthened with an increase in shareholders' equity of $1.16 billion, a 34.75 per cent increase. The results for this financial year represent the first full year results following the merger between Manufacturers Merchant Bank and Sigma . Profits for the first nine months were robust but were negatively affected by the sudden steep increase in interest rates in the market during the last quarter. Turnover increased from $704 million in FY 2002 to $788 million in 2003.
If this merger does get approval and go through, it would make this entity the biggest merchant bank in Jamaica and one of the largest indigenous banking institutions in the Caribbean region. Both Mr. Byles and Mr. Matalon were unavailable for comment last night.
