Aug 2010 Financial News

Proven acquires Guardian Asset Management

Aug 20, 2010

Proven Investment Limited yesterday announced that it completed the purchase of Guardian Asset Management Jamaica Limited (GAM), and planned to immediately rename the company Proven Wealth Limited.

The asset management firm's Trinidadian-based parent, Guardian Holdings Limited (GHL), also notified the Jamaica Stock Exchange (JSE) of the sale yesterday.

"GHL has completed the sale of 100 per cent of the shares of GAM," said the notification. "The operations of GAM in Trinidad & Tobago have not in any way been affected by this transaction."

"Funds managed on behalf of Guardian Life Limited (GLL) and West Indies Alliance (WIA) in Jamaica will now be managed by an Investment Department within GLL, led by Vice President Michael Parker," the release added.

The deal closed five weeks after Proven signed a agreement on July 7, 2010, which was conditional on a due diligence exercise being conducted.

Proven's management declined to disclose the purchase price but Proven's CEO, Christopher Williams – who will replace Lisa Gomes as the head of the asset management company – told the Business Observer that the acquisition was financed largely by capital and only 40 per cent of the sale price was paid for through debt.

On Monday, Proven closed a rights issue, which raised US$6.8 million as the firm moved into its acquisitive mode.

Prior to the rights issue and finalisation of the purchase deal, Proven had invested over 90 per cent of its funds into fixed income securities, which helped returned an annualised return on equity of eight per cent on the US dollar investment but the company is shifting its focus towards private equity – the GAM acquisition being its first.

"This acquisition by Proven will complement the investment strategy undertaken by PIL to date," said Williams in a press statement issued yesterday. "Our approach has involved investing in tradeable securities – ninety per cent of which has been fixed income – and we feel that this will lead to a better return on equity. We chose to acquire GAM because of the competence and experience it has in the securities dealers industry. It is a well-run company and we are pleased with the organisation's operations,"

In 2009, GAM reported that it earned $813 million in revenue, which was 77 per cent higher than year-earlier levels, while its after-tax profit stood at $463 million, up 147 per cent.

Last year's improvement in profitability resulted from "better interest rate spreads and additionally through realised gains on security trading," said the asset management company's parent in its annual report for 2009. It is not yet clear how the new entity – Proven Wealth – will perform without the funds that were managed on behalf of GLL and WIA or in the lower interest rate environment that prevails after the Jamaica Debt Exchange.

Even then, GAM report after-tax profit ranging between $150 million and $200 million from 2006 to 2008.

But Williams said "the primary adjustment to the business model will be reducing the on-balance sheet intermediation business while increasing portfolio management services" or put another way by the new investment house's CEO: "building portfolios that grow clients' wealth".

While the company is to be re-named, Proven will maintain most of the existing staff and management, although Williams anticipates that the staff complement of approximately 60 persons might be cut by a third.

Proven Wealth's board members will comprise Peter Bunting as chairman, Mark Golding, Christopher Bicknell, Gary Sinclair, Peter Reid, Johann Heaven, who will be senior vice president, investments and finance, Gomes, who will demit office as President and CEO on August 31, and William, who will take over the role of president on September 1.

Proven Wealth's new management will also include Sherri Murray, who will assume the position of vice president, Operations and Paul Simpson, assistant VP investor relations.

Guardian Asset Management (GAM) is a subsidiary of the Trinidadian company, Guardian Holdings Limited and also has an arm based in Trinidad & Tobago. The Jamaican operations managed third-party client funds and had responsibility for the investment management of the assets and portfolio of the Jamaican companies within the Guardian Holdings Group.

Proven Investments Limited (PIL) is a partnership of Jamaican investment bankers whose 200 million shares priced at US 10 cents per share for PIL, which opened on January 27, were quickly snapped up by 150 private and institutional investors. The deal, which netted US$20 million, was arranged by Proven Management Limited (PML). The firm commenced operations on March 1, 2010.


Source:
Jamaica Observer
Friday August 20, 2010

http://www.jamaicaobserver.com/business/Proven-acquires-Guardian-Asset-Management_7888998