Nov 2006 Financial News

Bunting's fate may lay in competitor's hands

Nov 17, 2006

Peter Bunting, chairman of investment bank Dehring, Bunting & Golding (DB&G) finds himself in a very interesting point in his career. "Some people have pointed out to me that my fate rests in the hands of my competitors," he observed on Wednesday.

Indeed. Since the announcement of the Bank of Nova Scotia and its subsidiary Scotiabank Jamaica's intent to purchase not less than 75 per cent of DB&G on October 20th, there has been much speculation as to how the deal will play out.
Said one competitor speaking anonymously, "I know Peter, he will make this deal happen." And while Bunting says he hasn't been burning up the phone lines, he does admit, "We've met with a few shareholders and institutional investors. And I know that they [the institutional investors] are meeting this week to take a decision."

Bunting admits that he is aware that there is some hesitation on the part of a few of his fellow brokers to sell their DB&G holdings. Why? Because investment experts have said that the very fact that BNS wants DB&G makes the investment house a very hot, very valuable property. Bunting acknowledges this.

"The deal is largely dependent on the institutional shareholders because they have the volume. Many say the $21.08 offer price is fair, but some want to hold on and participate in the upside that will occur if the deal gets done.
But it's like saying I want to go to heaven, but I don't want to die. The upside will only happen once BNS steps in, and some recognise this and have committed to sell 75 per cent of their shareholding - they are not looking for a free ride."

Another hurdle is the sentiment that if one holds out to the very last day, that is November 27th, then BNS will pay more because they really want the deal to happen. Speaking to the Business Observer on Wednesday, president of Scotiabank Jamaica, William Clarke said, "The price is the price is the price." Clarke also noted that, "There is a feeling that we will pay more for DB&G shares. In fact, there are some persons discouraging others from selling because they figure we will raise the price. We will not."

Interestingly, bids on the DB&G share price opened on Wednesday at $21.09, a cent more than what Clarke announced he would pay. Bunting noted, "That was someone being naughty. I don't quite understand why they would do that. They were just being troublesome." But getting to the point of the offer price, Bunting said, "The offer price will not be upped. Once BNS came into the agreement with the lock up shareholders, that is the price everybody will get. But I understand that people are reading the newspaper articles and feel that they should wait to get more. However, there is no value in holding out to the last minute."

In fact, Bunting noted that there was no value in selling DB&G shares for the $21.09 that some persons engaged in yesterday. "When you sell to BNS, you get $21.08 in your hand. When you sell in the market, you get about fifty cents less than $21.09. It doesn't suit someone to get $20.70."

Even so, there are some detractors of the deal who say that they would have preferred a share swop - that is, DB&G shares for BNS shares. To this, Bunting replies, "Why not just go out and buy BNS shares? We have clients who have taken that approach."

Now it must be asked - what will happen if the deal doesn't go through? "People have said to me that if the deal doesn't go through it is neither here nor there as the market will recover in a few months and the shareholders who are in the lock up agreement can realise their gains then," Bunting observed. "However, while I don't think the lock up shareholders will want to off load their 124 million DB&G shares, there will be an overhang of supply in the market. My counter argument is then there would be pressure on the DB&G share price and keep it at its current levels."

Another scenario has been bandied about. If the deal does not go through with BNS there is another suitor waiting in the wings. "Truthfully, it would be hard to see doing a deal with another suitor in the near term," Bunting replied.

"From a personal point of view, so much time and management resources have been spent in negotiation. It is an exhaustive amount of work. And I wouldn't want to put the staff through this uncertainty again," he states. "And the truth is, there are not a lot of BNS's out there that can write a cheque for US$80 million."

Yet, Bunting admitted, "There may be someone who comes along and would want to do a share swop. But for shareholders, it would change the nature of their holdings but doesn't give them an exit. A deal like that would only increase the uncertainty."

So, with less than two weeks to go, what is Bunting's gut feeling about the eventual outcome of the deal? "It's still in the balance. I am hopeful because we have put a tremendous amount of time and energy in doing this deal. But it is far from over. It's going to go down to the wire."


Source:
Dennise Williams
The Jamaica Business Observer
November 17, 2006


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