Oct 2006 Financial News

BNS deal looks good for DB&G's lead principals

Oct 27, 2006

Last week, the Canadian based Bank of Nova Scotia and its subsidiary Bank of Nova Scotia Jamaica (BNSJ) entered into a lock up agreement with eleven Dehring Bunting & Golding shareholders for 40 per cent, or 124.783 million shares of the investment firm as a precursor to the formal offer presented yesterday.

This deal, at $21.08 per share, represents a payout of $2.63 billion to the top eleven shareholders, many of whom bought DB&G shares in 1992 at $1.00 per share. To consummate the deal, Scotiabank only needs to get an additional 102.467 million shares by November 27th. As it stands, the Key DB&G principals of Peter Bunting, Mark Golding and Gary Sinclair with 85.4 million shares among them will pocket approximately $1.8 billion or (US$27.3 million) once the deal is finalised.

However, it isn't a case of Bunting, Golding and Sinclair (the key DB&G principals) swapping shares for cash and riding off into the sunset.

Collect Half Now, Half Later
According to the offering Circular, Bunting, Golding and Sinclair will get, "50% of the total purchase price converted into United States dollars and retained by Scotiabank against possible liabilities arising under the agreement."

Continue to work for DB&G
"If they have never worked before, they will work now," said BNSJ president William Clark at the press conference held yesterday at DB&G's Holborn Road offices.

As a condition to collecting the other fifty per cent of the sale price, the key Principals will continue to work at DB&G for the next two years. Bunting entered into a Key DB&G Principal Engagement Agreement, whereby he agreed to continue in the employment of DB&G as Chief Executive Officer at an annual salary of J$7,000,000.00 (subject to annual inflation adjustment) and a three per cent profit share bonus.

Garfield Sinclair entered into an agreement whereby he agreed to continue as Chief Operating Officer for an annual salary of J$6,000,000.00 (subject to annual inflation adjustment and a 1.8 per cent profit share bonus. Mark Golding entered into an agreement whereby he agreed in consideration for a monthly retainer of J$120,000.00 (plus GCT) and 1.2 per cent profit share bonus.

Meet Performance Targets
And BNSJ intends to get a return on investment almost immediately. The Key DB&G Principals jointly and severally guaranteed to Scotiabank that the Average Annual Core Earnings of DB&G for the 2 years following completion of the Transaction will not be less than J$640,307,000. Should the performance target not be met, Bunting, Sinclair and Golding will have to forfeit an agreed amount of money to compensate Scotiabank.

Three Year Non-Compete Clause
And for the year after the key players part company they cannot take their expertise elsewhere. According to information contained in the Circular offer by Scotiabank, "Each of the Key DB&G Principals also by this agreement entered into non-compete covenants whereby each of them covenanted that:

(i) for a period of 3 years he will not directly or indirectly engage in any business of the kind currently
provided or currently contemplated and approved by DB&G or any of its subsidiaries or which any of them is permitted to provide by its operating licence;

(ii) for a period of 2 years, he will not be engaged in or provide financial support to any business that is the same or, substantially similar to, or competitive with the provision of goods or services which may be provided by an insurance company, bank, mutual fund company, consumer finance company or non-banking financial institution operating in Jamaica or Trinidad & Tobago;

(iii) for a period of 3 years, solicit or induce any person who was an employee or any customer of DB&G or of any of its subsidiaries, prior to the launch of the offer, to leave his employment or to
change his custom."


Source:
The Jamaica Observer
Friday, October 27, 2006

http://www.jamaicaobserver.com/magazines/Business/html/20061026T190000-0500_114554_OBS_BNS_DEAL_LOOKS_GOOD_FOR_DB_G_S_LEAD_PRINCIPALS_.asp