Wed | Aug 4, 2021

GK hunting regional partner for SIECL roll-out

Takeover of life insurer expected to close by July 31

Published:Friday | May 28, 2021 | 12:16 AMKarena Bennett - Business Reporter
File 
Don Wehby, Group CEO of GraceKennedy Limited.
File Don Wehby, Group CEO of GraceKennedy Limited.

GraceKennedy Financial Group Limited, GKFG, is in discussions with a business that for now is only being described as a “large operator in the Caribbean”, as a potential partner in Scotia Insurance Eastern Caribbean Limited, SIECL, a new...

GraceKennedy Financial Group Limited, GKFG, is in discussions with a business that for now is only being described as a “large operator in the Caribbean”, as a potential partner in Scotia Insurance Eastern Caribbean Limited, SIECL, a new acquisition that is yet to close, but for which regulatory approval is expected by July 31.

GKFG, a subsidiary of food and financial services conglomerate GraceKennedy Limited, expects that SIECL will be accretive, that is, it’s expected to grow earnings for its insurance business segment, which in the March quarter produced earnings before tax of $83 million on revenues of $2.5 billion.

But Group CEO of GraceKennedy Limited Don Wehby wants to push projected revenue targets from the acquisition a little higher through strategic partnerships.

GKFG is looking to form synergies with a bank or banks in the region, given SIECL’s vertical fit with the banking industry, the Financial Gleaner has learned from well-placed sources. However, Wehby has declined to comment on the strategy at play.

“We are having discussions and it’s going well, but I can’t disclose anything further at this time … hopefully it will come to fruition,” he told the Financial Gleaner following the company’s annual general meeting on Wednesday.

GraceKennedy operates its own bank, First Global, but that subsidiary does not have a presence outside Jamaica.

SIECL will expand GraceKennedy’s regional footprint into the markets of Anguilla and St Kitts-Nevis; while strengthening the conglomerate’s base in Antigua & Barbuda, Dominica, Grenada, St Lucia and St Vincent & the Grenadines, where it already operates through subsidiaries GK General Insurance and GK Insurance (Eastern Caribbean) Limited.

Over the short to medium term, GraceKennedy is looking to deepen SIECL’s market presence by offering credit protection on personal loans, residential mortgages, personal lines of credit, and personal and small business credit cards.

It will become the sixth addition to the GK insurance portfolio, joining another life insurer, Canopy; general insurers Key Insurance, GK General in Jamaica; GK Insurance Eastern Caribbean; and brokerage Allied Insurance Brokers.

SIECL is one of two acquisitions announced this year from a pool of 12 prospects, the second being the 876 Spring Water brand. GraceKennedy floated a $3-billion bond to pay for the purchases, but the precise acquisition prices remain undisclosed.

The conglomerate typically finances its acquisitions with 70 per cent debt and 30 per cent equity, Wehby has previously said.

On Wednesday, Wehby told GK shareholders that the M&A unit, which is headed by Andrew Leo-Rhynie, is in active discussions regarding another six acquisition targets, including a food service company.

“I can’t confirm or deny anything right now, but the main point that I want to make is that, whether organic growth or mergers and acquisitions, we are moving very aggressively in the GK food business,” he said.

Those moves included the merger of Grace Food Processors (Canning) with another of GK’s manufacturing operations, National Processors, which is expected to bring savings of US$1 million annually to the group.

karena.bennett@gleanerjm.com