Dec 2015 Financial News

GHL sets sights on Central, South America

Dec 03, 2015

A win-win situation seemed to be the general consensus of senior management at Trinidad and Tobago-based Guardian Holdings Limited (GHL) and the National Commercial Bank of Jamaica Limited (NCBJ) when they announced plans for NCBJ to acquire 29.9 percent of GHL earlier this week.

The private sale, said to be worth millions of US dollars, would see NCBJ acquiring shares currently held by companies owned by the Lok Jack and Ahamad families and by the International Finance Corporation (IFC); the private sector arm of the World Bank. The Lok Jack and Ahamad families will, however, continue to own 22 percent of GHL shares.

Approval is subject to all necessary regulatory approvals here in Trinidad and Tobago as well as in Jamaica, but both companies expect the sale will be approved. Lok Jack will continue as GHL chairman, and the majority of the board will continue to be independent directors. Addressing a crosssection of the who’s who in TT’s financial services sector during a press conference at Hyatt Regency, Port-of-Spain on November 30, GHL chairman Arthur Lok Jack said with NCBJ on board, GHL would have “the benefit of knowing that we can look around, and start to see where we can grow” since it already dominates much of the insurance business in the Englishspeaking Caribbean.

“Guardian has approximately 70 percent market share in TT in the life business. We sell more life insurance than all others in the country combined and multiplied by two. Our property and casualty company, from the tip of The Bahamas right down to Curaçao and the Netherlands Antilles, is the foremost and premiere property and casualty group in the entire Caribbean. Our life company in Jamaica is second only to Life of Jamaica/Sagicor and it’s a very profitable company.” Lok Jack went on to say GHL’s best avenue for growth now lies in Central America and parts of South America. “Central America has 50 million people (with) young, evolving markets and a tremendous, growing, middle class. (GHL) is not going to grow by putting up an office there to try to sell insurance against established insurance companies.

Our growth would have to come from acquisition; find other familyowned insurance companies where the family is looking for a liquidity event or looking for an exit, get involved with them.” Lok Jack added that with a company like NCBJ on board, the Lok Jack and Ahamad families “are prepared, if (GHL) wants to go ahead now and do some major acquisitions, (we) would support that.” Meanwhile NCBJ Chairman Michael Lee-Chin said the bank would be able to provide GHL with “prudent (advice) on long-term asset purchases”, thus creating wealth for all stakeholders. NCBJ’s Group managing director, Patrick Hylton, noted that “this very important investment” enables the bank to participate in diverse economies across the region. He said this would be in addition to NCBJ’s plans to establish “a regional footprint as a bank and as a financial institution”.

NCBJ is one of the largest banks in the Caribbean and the top banking and financial services group in Jamaica, while GHL is the leading insurer across the region, holding leading positions here in TT and in Jamaica.

The possibility of staff cuts at GHL was dismissed by Group CEO, Ravi Tewari, who said the transaction was “extremely positive and expansionary” for the company.

“It will create growth, both for Guardian and NCBJ, as, at a shareholding level, two of the largest financial services companies in the Caribbean form a relationship,” Tewari stated.

During the question and answer portion of the press conference, NCBJ chairman Michael Lee-Chin was asked to disclose the purchase price and to state whether or not NCBJ intends to make a take-over offer for GHL later on.

“The price, as of now, is a private transaction, so it will be disclosed when we have to disclose it by virtue of regulatory requirements. In terms of our intention, this is a big investment for us. We don’t have, at this point in time, any intention to really move beyond this,” Lee-Chin replied.

Share sale: How it happened

In 2009, GHL reported a loss of $821 million after absorbing trading losses of $355 million and non-cash accounting losses of $592 million related to Zenith Insurance Group, a United Kingdom motor insurance company which GHL had acquired as part of its plan to expand into the UK market.

Lok Jack noted that after the market “went into serious recession”, GHL decided to exit the UK, thus taking some “very large write-offs” which led to a reduction in its equity.
Although its rating agency, A M Best, was “quite willing” to hold their ratings with GHL because they were, as Lok Jack put it, “very happy that we didn’t have that legacy issue of the UK continuously dragging our profits down,” the board felt it would be prudent to build back equity.

They then brought to the table the International Finance Corporation (IFC); the private sector arm of the World Bank. The IFC decided to take an equity stake in GHL, through its private equity fund.

Lok Jack explained that “these types of funds have a horizon for about seven years before you get a liquidity event and you move on.

So time was clicking on that” and GHL needed to find a buyer for IFC’s shareholding.
While GHL’s board was seeking a local or regional solution to its “liquidity issues”, Lok Jack said IFC, “in seeking their own exit,” was considering bringing in “international investment bankers et cetera, to make an international auction of the company.” “We resisted that and stayed the course with Guardian,” Lok Jack revealed, adding that about a year ago, he met with some people from Jamaica who said they would like to have a substantial shareholding in GHL.

“Those discussions went on for a while and one of the companies involved was NCBJ. The others were not able to go forward with their position and (so) after many discussions, it was decided that NCBJ would like to buy 29.9 percent of Guardian...The families decided to stay in the company and on that score, bought out the residual IFC shareholding.” As noted before, the Lok Jack and Ahamad families will continue to own 22 percent of GHL shares.
The transaction may be a private one, “surrounded by confidentiality agreements”, but Lok Jack said discussions were had with Central Bank Governor, Jwala Rambarran, the TT Stock Exchange Commission (SEC), Prime Minister of Dr Keith Rowley and Finance Minister Colm Imbert. “Everybody was very happy that we were able to find a regional solution. (GHL) will remain listed on the TTSE and on other stock exchanges where we’re traded,” Lok Jack said.

Source:
Sasha Harrinanan
Newsday
Thursday December 3, 2015

http://www.newsday.co.tt/businessday/0,220757.html