Barita in takeover talks

Barita closed at $6.85 on Thursday.

Well known brokerage house, Barita Investments is currently in discussion for the sale of majority shareholdings in the Company.
A release from the company to the Jamaica Stock Exchange on Thursday advised that the Company has received an offer to acquire the majority shares and that the offer is under consideration by the Company’s Board of Directors and that discussions continue, pending the preparation and conclusion of definitive agreements.
The 76 percent majority shareholder with 339,975,664 shares and chairman, Rita Humphries-Lewin who started the company from the 1970s, is currently in her 80’s and close to retirement, making the offer opportune for her.
The offer comes at an interesting time just after Proven Investments closed their rights issue that raised US$16,547,873 (J$2.1 billion) resulting from the sale of an additional 68,949,472 ordinary shares. Barita could be a good fit for them as well as others within the sector, especially with an established Unit Trust portfolio. In the past investors were of the view that Barita could make a good fit for Mayberry Investments. Information glean suggest that they are not one of the arties showing an interest just now. Victoria Mutual Group has just started a Unit Trust schemes but the cost of a start up is high until it gets to a critical mass, Jamaica National has no unit trust portfolio and just started in the stockbrokerage business. Barita would make a great fit for them but it is unsure that their Chairman, Oliver Clarke would want to sanction that move at this time.

VMBS seems to be an interested party.

Barita has 445.877 million shares issued with a market capitalization of just over $3 billion, a simple majority holding would cost just over $1.5 billion at current price, assuming a price higher than the current one would result in a higher sum. The amount of capital raised by Proven would translate to $10 per share for a simple majority in Barita. IC Insider.com projects earnings for the current year at 90 cents. With the listed investments banks trading at PEs around 11 times, 2017 earnings, a reasonable value of $10 per share seems probable. With the company having unrealized gains not showing in the normal profit, a price around $10 should be attractive to both buyers and sellers at this time. An investor with cash would want to get as much of the shares of the majority owner, but with a mandatory offer having to be made to minority shareholders, they may want to go for a smaller amount initially with 65 to 70 percent looking viable. NCB Group have been on expansion run as well and the combination of NCB Capital Markets and Barita could create synergies. NCB group owns all of the investment arm making a merger with Barita down the road very viable.
Barita is primarily involved in stockbroking, Unit Trust management and repo business. The Unit Trust business that is poised to grow rapidly in a low interest rate environment, would be a big attraction for Proven who currently have no such business within their portfolio.

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