Oct 2006 Financial News

BNS' acquisition of DB&G moves a step closer

Oct 27, 2006

The courtship that began in December between the Bank of Nova Scotia Jamaica (BNSJ) and Dehring Bunting and Golding (DB&G) ended yesterday in a formal declaration of intent. The actual consummation, however, cannot take place without the blessings of at least 35 per cent of DB&G shareholders by November 27th.

BNS has already successfully wooed 40 per cent of DB&G shareholders lead by chairman Peter Bunting, company secretary Mark Golding and chief operating officer Gary Sinclair (see related story), and so with the full backing of the DB&G executive team, BNSJ president William Clark announced "this is the first of many new things to come at Scotiabank."

The offer is simple. For each DB&G share, BNSJ's parent company, Bank of Nova Scotia, will offer cash of J$21.08 or TT$2.00. As a sweetener, BNS will bear the cost of brokerage fees and Jamaica Stock Exchange cess charges. And not surprisingly, the executive management of DB&G has fully endorsed the offer by BNSJ.

"The market value of DB&G is US$100 million. That value transaction can only be done by very few players. Plus the market has been very illiquid over the past year, so an opportunity for long-term shareholders to cash out is a rare one," explained Bunting. Another reason why the executive management team has taken the decision to sell is, "The previous high rate of profit growth is unsustainable in the securities dealer sub sector."

Of course, BNS sees an opportunity to grow shareholder wealth. "We contemplated whether to build or buy a brokerage house. We do not have a particular expertise in this area, and we are so far behind, it was the logical thing to buy," said Clark.
And if it ain't broke, don't fix it. "DB&G will continue to operate as an independent subsidiary of BNSJ. DB&G has a complementary culture and more aligned with what we do at Scotiabank. The business model of DB&G will not change," said Clark.

In terms of the staff, "We propose no major management or staff changes as a result of this transaction, although it is possible that there will be some limited staff changes resulting from the synergies and efficiencies that we expect to derive from the acquisition. No director, manager or employee of BNS or BNSJ will receive any special compensation or incentive arising out of, or conditional upon, the outcome of the offer," the Scotiabank press release advises. In support of that sentiment, Bunting said, "We have built an incredible team over 15 years and we want to keep them."

And interestingly, Scotiabank advises that it will not seek more than 80 per cent of the DB&G shares as "we wish to ensure that DB&G should remain listed on the Jamaica & Trinidad Stock Exchanges." Clark added, "There is no compelling reason to delist the company and it is good to allow investors to have options."

Dennise Williams
The Jamaica Observer
Friday, October 27, 2006