NCB Capital buys 29% of JMMB
Published:Sunday | August 7, 2011 | 12:00 AM
Correction from Source
Trinidad and Tobago Stock Exchange sent out the following notice on Monday:
Please be advised that in the memo sent out on Friday 5th August, 2011 about the trading in Jamaica Money Market Brokers Limited shares by NCB Capital Markets Limited (NCBCM), the number stated as 482, 777, 325. The correct volume purchased by NCBCM was 428, 777, 325.
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NCB Capital Markets Limited (NCBCM) has bought a 29 per cent stake in Jamaica Money Market Brokers Limited, making it the 'single largest' owner of its rival.
The 482,777,325 share transaction was reported after market close on Friday, initially by the Trinidad and Tobago Stock Exchange, where JMMB and NCB Capital's parent, National Commercial Bank of Jamaica (NCB), are both listed.
The trade was not immediately reflected on the Jamaica Stock Exchange (JSE), where volume trades in JMMB were recorded at just 352,715 units on the JMMB stock for the week ending August 5. Trinidad reported trades amounting to 449,747,765 for the week.
But at Friday's closing price of J$7.15 per share on the JMMB stock in Kingston, the 29 per cent stake would be valued at J$3.45 billion.
The seller was not disclosed but NCB Capital Market's later statement that it is now the "single largest shareholder" in JMMB, suggests that the deal might have been struck in Trinidad. Prior to that, CLICO group was last identified as the single largest shareholder, with 554 million shares or 38 per cent holdings up to March 2011 - 450.6m held by CLICO and 103.45m by CLICO Investment Bank.
NCB said in a market filing released by Port of Spain that the "acquisition represents a 29 per cent stake in JMMB, which makes it an associated company of NCBCM."
The banking group said the deal is "in line with NCBCM's investment management strategy of taking positions in liquid financial assets and does not represent a move to take control of or acquire a majority stake in JMMB".
The term 'associated company' is applied to holdings of more than 20 per cent but less than 50 per cent.
JMMB, however, is pushing back at the description of the transaction as an 'acquisition', saying it is more aptly defined as a purchase of shares.
A statement from the money market firm 'clarified' the transaction.
"Given the total percentage shareholding, this investment in JMMB will be treated as an associated company for NCBCM per international accounting standards. Patrick Ellis, JMMB's Chief Financial Officer further clarified: 'This categorisation is a normal course of financial accounting applied when a company buys shares between 20 and 50 per cent of an entity - it's an investment, and has no impact on the management or strategic direction of the company in which they have invested'," the JMMB release said.
JMMB Group CEO Keith Duncan has welcomed the transaction, however, saying it was a demonstration of confidence in his company.
"This is a clear indication that NCB sees JMMB shares as excellent value with growth potential," Duncan said.
NCBCM confirmed that while it was the single largest holder of JMMB shares, it was not the majority owner of the company.
"This acquisition of the JMMB shares is good for the NCB group as we continue to identify opportunities to improve shareholders' value and to fortify the financial strength of the institution," NCBCM
CEO Dennis Cohen said in a company statement.
"It is in line with NCBCM's investment management strategy of taking positions in liquid financial assets and does not represent a move to take control of or acquire a majority stake in JMMB."
JMMB and NCB Capital Markets are two of the leading brokerages by funds under management estimated at about J$750-800 billion across the industry.
One of JMMB's coveted 'assets' is its strong client base of about 160,000.
NCB Capital said JMMB remains No 1 in terms of assets under management while NCBCM is the largest in terms of shareholder equity.
The company appears to be regaining ground on its finances. Its first quarter results ending June indicates a recovery of operating cash position from a deficit of J$1.37 billion at March 2011 to a surplus of J$6.4 billion three months later. Its net worth also rose from J$9 billion to J$11b in the quarter.
JMMB also reported first quarter profit of J$951 million at June 2011, a fivefold improvement from J$177m in Q1 2010.
Interest income underperformed in the quarter— falling from J$2.4b to J$2.2b — but JMMB overcame the J$200m slide with massive savings of half-a-billion dollars on the cost of writing business, and a near fivefold increase in gains on securities trading.