NCB Financial acquisition of 29.99 percent stake in Guardian Holdings cost $28 billion 2016. Make it the largest shareholder in an attempt to return it to majority ownership to which it previously belong.
If NCB were to increase their holdings to more than 50 percent it would strengthen their hands in greater integration of the group with the focus on cost reduction and income enhancement. Two areas would be, a possible merger of the two general insurance companies that would increase the muscle in the market and cut out lots of duplicated cost, the life insurance could also generate savings and increase potential income. An on the capital market side there is much to be gained with an increased financial strength that could become a real powerhouse in raising and providing capital within the region. But there at least one more compelling reason, Guardian’s profit for the six months to June is 83 Trinidad cents per share and is ahead of the 70 cents earned in 2016, earnings for 2018 should end up around TT$1.90 up from $1.61 last year. NCB currently trades in
Guardian Holdings closed at a 52 weeks’ high of $16.75 on TTSE..
Jamaica at a PE of 12 times 2017 earnings while Guardian earnings is below 7, any acquisition around the current price would be a huge steal for NCB and would be a big boost to the growth in 2018 earnings and by extension the stock price. That is far too attractive a deal for NCB to forego at this time. Raising the shareholder to 75 percent would create increased profits around J$2 billion and add about $12 to the stock price and that is without any group synergies.
At the time the acquisition, some 36 percent of the company was available for sale not including International Financial Corporation block which NCB acquired. Had they gone for the full amount, it would have triggered the takeover rule of the Trinidad and Tobago Stock Exchange and would have required the group to have much more funds available, to swallow a much larger amount. A year and half having elapsed since that acquisition NCB has amassed more of its own funds by way of retained earnings and lately, from a floatation of bonds on the local market that initially raised $18 billion, the equivalent of US$138 million in September and a further attempt to raise US$105 million at attractive interest rates.
The funds raised was said to be used for regional and local expansion and acquisitions by the group. Acquisition of more Guardian shares seems to most logical more, along with more JMMB Group shares.
market capital is TT$3,538,793,786, a 20 percent stake that would take NCB’s stake to just under 50 percent, could cost around US$105 million, an amount that is well below the amounts raised recently and with the amounts they went to the market for giving them the financial muscle to acquire an additional 45 percent at current prices, that could take the ownership to 75 percent.
The case of acquiring JMB shares is compelling NCB with 26.3 percent of the issued ordinary shares is by far the largest shareholder with next being JMMB ESOP with 9.6 percent but Trinidad’s Colonial Life Insurance with a block of 6.3 percent can no longer be seen as long term holder and these shares may well become available for sale which NCB maybe best suited to acquire. The reality is that the Duncan’s family no longer holds a commanding interest in the group and based on the top 10 listing may just be able to muster votes of about 23 percent.
