JMMB shareholders signal support for CCFG deal
Published:Friday | September 16, 2011 | 12:00 AM
- Next test: central bank scrutiny
Sabrina Gordon, Business Reporter
Jamaica Money Market Brokers Limited (JMMB) voted Wednesday to increase the company's authorised share capital, signalling their approval of the planned acquisition of Capital and Credit Financial Group Limited (CCFG).
JMMB's authorised capital will rise from 1.5664 billion ordinary share units to 1.8164 billion shares. Shareholders voted yes despite a disclosure by group CEO Keith Duncan that the merger would dilute their holdings by just over 10 per cent.
"This potential acquisition will deliver stronger financial performance," said Duncan at the company's annual general meeting ahead of the vote.
"While this transaction would see the share dilution of 10.29 per cent for JMMB shareholders, it would also generate an immediate increase of 18.33 per cent in book value, to J$8.92, for all JMMB shareholders," he said.
JMMB is also projecting improved average return on equity of 20 per cent in the five years after acquisition, compared to past performance of 15.86 per cent over the past five years.
JMMB expects to complete its application for regulatory approval by the end of September.
The Bank of Jamaica and Ministry of Finance approval of the transaction could take three months or more.
JMMB in August proposed a takeover of CCFG in a combina-tion cash and shares deal valued at J$4.22 billion..
The cash component is worth J$2.95 billion or 70 per cent; the share component will swap CCFG shares for JMMB shares at J$4.55 per unit, amounting to J$1.27 billion or 30 per cent.
The hook for JMMB in going after CCFG is the banking licence held by main subsidiary Capital and Credit Merchant Bank (CCMB).
Duncan indicated that the underperforming debt weighing on CCMB and CCFG's balance sheets has been priced into the deal, and accounts for the 41 per cent discount on the purchase price.
The discount references the difference between the J$4.55 offer price and CCFG's estimated book value per share of J$7.72.
CCMB had J$4 billion of loans arrears last year, close to a quarter of which was impaired.
Duncan was also mum on potential staff rationalisations; but said shareholders would get stronger financial performance, increased shareholder value and efficiencies through the consolidation of services.
"We will seek to extract all the efficiencies that we can, and where there are overlapping of branches we will consolidate, of course, with JMMB lead as a stronger brand," said Duncan.
The CCFG assets include the merchant bank, a securities dealership and a remittance company, as well as a Florida-based subsidiary, Capital and Credit International Incorporated, which was collapsed into US investment bank/broker dealer Blaylock Robert Van LLC, last year.
Capital and Credit owns a piece of Blaylock as a result.
Duncan said JMMB was still reviewing the implications of the Blaylock relationship.
"I can't comment on that right now ... Capital and Credit International and the relationship they have with Blaylock is something that we will be reviewing to see how we go forward. We have not made any decision around it yet," said Duncan.