May 2004 Financial News

Capital & Credit gets nod for Jamaica Unit Trust

May 05, 2004

Ryland Campbell's Capital and Credit Merchant Bank has been recommended to Cabinet as the preferred bidder for the government's 92 per cent stake in Jamaica Unit Trust, reliable sources have told the Business Observer.

Two of the six companies that tendered for the unit trust were short-listed to be recommended to Cabinet - Capital and Credit and National Commercial Bank (NCB). But the merchant bank was given the edge as the more favoured suitor, with NCB being named as a second candidate in the event that there is a dramatic and unforeseen development that could rule out the leader.

According to our sources, Capital and Credit - the highly profitable, 10 year-old indigenous merchant bank has already crossed two important thresholds in securing the asset that will immediately land it over $1 billion in managed funds: Two important boards have signed off on the recommendation of the five-member committee.

The Financial Institution Services, the precursor to Finsac, that is handling the sale of 37 per cent of the unit trust's shares on behalf of the Jamaica Development Bank (JDB) has given the bank the nod. It is understood that the JDB board is to review the committee's recommendations this week.

Also, Finsac, which controls 55.7 per cent of the unit trust stocks, has supported Capital and Credit's bid. Finsac gained control of the block of shares when - in 1997 - it pumped billions of dollars into the now defunct Mutual Life, which held the shareholding in the unit trust.

The review committee that recommended the merchant bank was headed by a representative of the National Contracts Commission and included Mutual Life, Jamaica Development Bank, and FIS/Finsac representatives.

On March 8, FIS/Finsac opened the bid for the combined 92.7 per cent shareholding they held on behalf of the Jamaican government, in the 33 year-old unit trust.

Six firms tendered proposals: Grace, Kennedy & Company Limited, the Victoria Mutual Building Society, Dehring Bunting & Golding, Guardian Holdings Limited, NCB Capital Markets Limited, and Capital & Credit Merchant Bank.

Early last month, the Business Observer reported that all six firms met the criteria of the bid, but that NCB Capital Markets Limited and Capital and Credit Merchant Bank had emerged front-runners. Capital and Credit was said to have offered the better price - just slightly higher than NCB's offer price.

In buying the company, Capital and Credit will be landed a 15,000 client base, significantly more than its own current customer base.

The deal would also come at a time when this merchant bank is having its best financial results. For the three months to March 31, 2004, the bank posted after-tax profit of $275.1 million, a 312 per cent increase over the performance of the similar period last year.

The bank, which listed on the Jamaica Stock Exchange last year at $5 per stock, now trades at $20 per stock, making it one of the fastest growing stock prices on the market.

As at March 31, it reported assets under management of $49.6 billion, and capital of $2.7 billion.

Source: Jamaica Observer