Susan Gordon, Staff ReporterMichael Lee Chin is selling a stake in his Canadian financial advisory outfit, the Berkshire Group, but analysts here say that the move is unlikely to have an immediate or significant impact on the Lee Chin-owned National Commercial Bank (NCB).
Lee Chin was expected to tell NCB directors about his Berkshire plan at a board meeting yesterday, but he and NCB's managing director, Patrick Hylton, were unavailable to comment.
But a senior market analyst told the Financial Gleaner: "There is not a direct relationship between the two entities, except the Lee Chin connection. One is not directly related to the other operationally, therefore it is no material impact on NCB."
Berkshire, with more than 800 financial advisers and about C$12 billion under management, represents stockbrokers, insurance financial planners and financial planners who sell mutual funds, including those managed by Lee Chin's AIC Ltd. and its rival fund managers.
Strategic partner
A week ago Lee Chin sent a memo to staff, updating them about his decision to find a 'strategic partner' for Berkshire and his plan to build "a global wealth management business" - a move which the Canadian press saw as a move to head off an exodus from the company that has been losing employees.
"... It is crucial that any potential to form a future strategic partnership be pursued with the best interest of the company, its people and shareholders at the forefront," Lee Chin said. "If today there are organisations that have the ability to enhance and augment our business model, and ultimately raise our shareholder value, it is incumbent on senior management to explore these possibilities."
On Monday, Terri Oswald, the head of relations at Lee Chin's flagship, AIC, told the Financial Gleaner that her boss had nothing to add, at this time, to the media reports or his memo. "It's not something Mr. Lee Chin is ready to comment on."
"I can't comment on a speculation and at this time and Mr. Lee Chin can't," she added.
The Canadian press and money managers have speculated that HSBC, the world second largest banking group, to be among the companies interested in a share in the privately-held Berkshire, in which Lee Chin is believed to be willing to sell up to 20 per cent.
Bank of Nova Scotia, to whose Jamaican subsidiary NCB runs second, was also listed as a potential bidder. However, analysts in Toronto say that the best fit would possibly be with CI Financial Inc., and fund management company chaired by another Jamaican/Canadian, Ray Chang or such similar outfit.
investment banker
In his internal memo Lee Chin said he had hired an investment banker to advise on the deal, which would include valuing the price of the stake. Market analysts have roughly estimated Berkshire's value at between C$60 million and C$100 million.
Lee Chin's AIC has fallen under some pressure in recent years as the weak performance of its funds has challenged Lee Chin's credo of: buy, hold, prosper. At its peak in 2002, AIC had over C$15 billion under management but this is now down to $8 billion.
But Lee Chin clearly remains confident about the future, seeing the growth of his business outside of Canada and with Berkshire being an integral part of the expansion.
He told Berkshire staff in the July 19 memo: "My goal is to build a global wealth management business and I have had several successes in the United States, the Caribbean, India and in Canada. The whole organisation now encompasses over 4,000 employees and advisers and approximately C$25 billion in assets. I want you to fully recognise that Berkshire is an integral part of the overall plan."
In fact, Lee Chin said it was his intention to growth Berkshire into a $30 billion company with 1,500 advisers.
Source: Financial Gleaner, July 28, 2006
