Tue | Feb 18, 2020

GK and partners exploring merchant banking merger

Published:Wednesday | February 21, 2018 | 12:00 AMAvia Collinder/Business Reporter
Don Wehby, Group CEO of GraceKennedy Limited.

GraceKenndey Limited and its regional partners want a bigger slice of Barbados' merchant banking sector, but the merger under consideration will be guided by a feasibility study that is under way.

Signia Financial Group Inc of Barbados, in which GraceKennedy has a 40 per cent stake, is exploring a potential merger with Globe Finance Inc. The other ultimate Signia owners are Cave Shepherd & Company of Barbados with 40 per cent holdings, and Massy Holdings of Trinidad with 20 per cent.

In a stock market filing, GK said a non-binding Letter of Intent was signed in November 2017 and is the basis of exploratory discussions on the feasibility of a merger of the two merchant banks.

On Tuesday, in an update provided to the Financial Gleaner, GK Group CEO Don Wehby said Globe Finance and Signia offered similar products, including fixed deposits, retail and commercial lending, commercial leasing and foreign exchange services.

"A transaction of this nature would result in the formation of a significant player in the Barbados financial market and would be expected to generate both revenue and cost synergies," he said.

The merger would give the emerging outfit nearly half of the merchant banking market in Barbados.

"In Barbados, trust or finance companies and merchant banks are licensed under Part III of the Financial Institutions Act. Within the Part III Category, according to the Central Bank of Barbados Online Database, Signia had a 25 per cent market share and Globe a 23 per cent market share in fixed and timed deposits as at December 2016," Wehby noted.

Signia had total assets of BDS$223 million at the end of 2016. For that year it made a profit of BDS$3.7 million on net revenue of BDS$12.4 million.

GK noted that based on 2015 data, Globe made a profit of BDS$0.4 million on net revenue of BDS$12.9 million. The Financial Gleaner was unable to ascertain its asset base.

No timelines for the merger have been determined.

"Given the exploratory nature of the discussions around the feasibility of a transaction, any timelines would be subject to negotiations and regulatory approvals," said Wehby.

"Signia is regulated by the Central Bank of Barbados and the Financial Services Commission, so any potential transaction would require regulatory approval," he said.

The transaction would also have to be approved by Jamaican regulators, the GK CEO said.