Oct 2007 Financial News

A royal takeover for a Royal Bank

Oct 01, 2007

In what is likely to be the biggest takeover deal in the Caribbean in recent times, Royal Bank of Canada (RBC) is getting ready to buy out local banking giant, RBTT, in an acquisition priced at well over US$2 billion.

Sources report that an acquisition agreement is close to sign off by the Peter July-led Board of RBTT Directors.

The RBC offer is said to contain a mix of cash and stock in a buyout that sources say has already secured the approval of key shareholders, among them the National Insurance Board (NIB) which has a 22 per cent interest, Guardian Holdings Ltd, a 14 per cent stakeholder and business tycoons Arthur Lok Jack, Richard Azar and Imtiaz Ahamad, who are listed among the largest individual stakeholders.

And while the Peter July board has refused to say anything more than the bank is having "strategic discussions with other parties", the Sunday Express understands that RBC, the latest in a series of Canadian suitors to knock on RBTT's door, is the favoured partner for a takeover deal.

Both have financial incentives to see the deal through, according to financial sources. RBC, Canada's largest bank is flush with acquisition dollars, assets of Can$563 billion and a market capitalisation of Can$69 billion.

It is also trailing behind rivals Bank of Nova Scotia and First Caribbean International Bank (FCIB),a subsidiary of Canadian bank, CIBC in its Caribbean operations.

RBTT, Trinidad's largest bank with assets of US$7 billion, has stumbled in recent years on issues related to management, flat earnings and growth limitation.

The RBC offer, comprising 60 per cent cash and 40 per cent RBC stock, if approved by shareholders, would give RBTT stockholders a much-needed boost with an option of cash and RBC shares - Can$55.26 at the close of trade on the Toronto Stock Exchange on Friday.

The buyout offer of a flat TT$40 per RBTT share plus RBC equity, according to sources, has found favour with a substantial block of RBTT shareholders.

Exploratory talks aimed at securing the requisite foreign ownership licence from the regulatory agencies and the Patrick Manning Government have reportedly gone well, said sources, adding that the RBC buyout of the local bank has been given the green light to go ahead.

And while the acquisition might be close to being a done deal, Central Bank Governor Ewart Williams, on Friday, told the Sunday Express that the Bank was yet to be "formally notified".

A not unusual event, said sources close to the deal, noting that one option being looked at as an initial part of the transaction is the sale of RBC's Caribbean banking interests to RBTT.

This manoeuvre would give RBC an immediate foothold into RBTT as a 20-plus per cent stakeholder.

Still to be worked out, however, is the price of RBC shares which are to be listed on the local Stock Exchange under the depository receipt system used on the Nasdaq and other major Exchanges where a specified number of shares of foreign companies are issued and traded.

Sources say the listing of a big international bank like RBC on the TT Stock Exchange would be a major coup for this country and could well catapult Trinidad centre stage and a step closer to the Prime Minister's dream of making this country the financial capital of the Caribbean.

Financial analysts say if 20 per cent of the cash or $TT1.6 billion from the RBTT sale goes back into the local market, it could help the recovery process of the stock market which has been in the doldrums in recent time.

Speculation of a takeover has seen RBTT stock climb from the start of September by $3 closing at the end of trade on Friday at $34.01.

GHL, a substantial shareholder in RBTT, has also benefitted from the market speculation, closing at $25 on Friday after starting September at $20.02.

Source:
Camini Marajh cmarajh@trinidadexpress.com
The Sunday Express
Sunday, September 30th 2007

http://www.trinidadexpress.com/index.pl/article_news?id=161209670