Republic takes 54% stake in Cayman Bank

Republic Financial Holdings Ltd (RFHL) is one step closer to completing its latest takeover — Cayman National Bank in the Cayman Islands. On Monday, in a release, the Caribbean’s biggest indigenous financial institution announced that it had “received acceptance” from shareholders who have taken up the company’s $6.25 per share offer, effectively giving RFHL 54.14 per cent of the company — the undisputed majority shareholder, although the consummation of the deal still remains subject to certain other conditions, including necessary government and regulatory approvals.

The company will now control 22,934,246 ordinary shares of Cayman National — a transaction costing over US$143 million. Republic first made its partial offer (a bid for some, not all of the shares in a company) for Cayman National in mid-September, and the deadline for shareholders to accept or decline is October 22. Republic had said its goal was to acquire 51 to 74.99 per cent of CNB’s shares. The deal is being transacted on behalf of RFHL by its wholly-owned subsidiary, Republic Bank Trinidad and Tobago (Barbados) Ltd (RBTTBL). RBTTBL is the owner of RFHL’s existing offshore operation in the Cayman, Republic Bank Cayman. “It therefore made sense to retain that ownership structure. That structure was beneficial to the Group since it made the flows between territories more efficient,” RFHL president Nigel Baptiste, also Republic Bank MD, told Business Day in an email interview.

The acquisition, he added, has two main objectives: to create additional value and opportunities for RFHL’s existing stakeholders and secondly, to create value for the stakeholders of the targeted entity. “We chose CNB because of the similarities between our two organisations with respect to values, business processes and opportunities. It complements our existing footprint and gives us a valuable presence in a strong USD generating territory,” Baptiste said. The deal, he added, will be financed through debt borrowing, with no foreign exchange implications.

Baptiste said RFHL was “quietly confident” that the bid will go through. On October 9, there was a shareholder vote on a change in the company’s articles of association — basically the company’s version of a Constitution — and this was overwhelmingly supported by shareholders with 79.7 per cent of votes cast being in favour, he said. “If in the end the transaction did not occur, we would be disappointed but continue to press forward with the many other initiatives that we have in train to add value for our stakeholders. We neither dwell in disappointment nor reflect on regrets,” Baptiste said.

The feedback, though, has been “very positive.” “The value to be gained on all sides has been evident to many. A number of CNB shareholders are concerned about the bank’s loss of identity but we don’t think that will happen and we are confident that our actions will speak clearly for us in due course,” he said.

Baptiste said historically RFHL’s presence in territories have fueled increased bilateral trading and investment activities in TT, and the bank expects that to happen again.

Republic, the most successful company on the local stock exchange (RBL: $106), has consistently shown robust growth — for the nine months ending June 30, the company recorded nearly $1 billion in profits, which it attributed to improved overseas performance in the face of increased domestic taxation. Commercial banks in TT have to pay 35 per cent in corporation taxes, five per cent more than other corporations.

“(Overseas holdings) have steadily improved in terms of overall contribution. Our international acquisitions have generated positive improvements and their contributions have increased to account for around 30 per cent of RFHL’s performance,” Baptiste said. In the short to medium term, though, he doesn’t expect overseas performance to overtake domestic.

“Our goal is to provide the best value for all of our stakeholders and we remain focused on this. The bank is growing organically by about three to five per cent each year and we expect acquisitions to improve that further. We are always exploring acquisition opportunities; should any come to fruition, we’ll discuss then we’ll discuss further,” Baptiste said.