Sagicor: Alignvest deal not a takeover

It’s not a takeover, Sagicor’s group chief operating officer Ravi Rambarran insisted on Tuesday, on the heels of the insurance giant’s announcement that it will be acquired by Canadian investment firm Alignvest Acquisition II Corporation for US$536 million.

Instead, he said, it’s a business combination. Alignvest, Rambarran explained, was an investment entity listed on the Toronto Stock Exchange (TSX), with a share capital of US$400 million. Their listing rules, however, restrict them to investing in just one company. They decided on Sagicor.

“It’s not an entity that has offices, staff, administrative operations and all that but it has cash to invest. The can only use that money for one company and they chose Sagicor. What they told our shareholders is that they believe their shares have a value of US$536 million.

"They are saying to our shareholders, you bring your US$536 million share capital, and we will put in our US$400 million and together we can create a company with over US$900 million in share capital it can use to grow,” Rambarran said.

The reason for the “acquisition,” he said, was just so Sagicor shares could now be listed on the TSX, and delist from the TT and Barbados stock exchanges. The other option would be for Sagicor to acquire Alignvest and list on the regional exchanges. Given that Sagicor considers itself undervalued on the regional exchanges, “What do you think we would do?” he said.

The company chose to list on the TSX because it was a deeper, more liquid capital market, where shares could be bought and sold more easily. Whichever way it went, he said, there needed to be an acquirer.

The illiquidity of the local markets meant that even a small sale could change the entire value of the company. Last Friday, for example, a sale of 700 shares caused the price of the stock to fall from TT7.24 to TT$7. “That’s about US$1. In what world can someone selling 700 shares change the value of a company with a (market capitalisation) of 306 million shares?

“When our profits grow, nothing happens. When our profits fall, nothing happens. If Barbados and TT won’t give us proper value we’ve said we will delist and go to Toronto,” he said.

For shareholders who don’t want to list on the TSX, the company will allow those up to 10,000 shares to sell to Alignvest for US$1.75 a share–higher than the current traded price of just over US$1.

Either way, he said, Sagicor will now have more money to grow and the company will be stronger.

“Whenever we have chosen to grow, we either used borrowed or internal cash. Companies can also use share capital but because of our (undervaluation) we couldn’t. Now we can,” he said.

The other major Sagicor announcement on Tuesday was the acquisition of Scotiabank’s insurance portfolios for Trinidad and Jamaica for US$96 million. “If you get the opportunity to grow and the price is attractive, wouldn’t you? Now, instead of being a competitor, Scotiabank is now our exclusive distributor for the next 20 years,” Rambarran said.