THE FIRSTCARIBBEAN International Bank (FirstCaribbean) offer to swap each of its shares for 7.5 FirstCaribbean Jamaica shares is not acceptable, says Chris Berry, chairman of stockbrokers Mayberry Investments.
Country manager of FirstCaribbean Jamaica, Raymond Campbell, says in response that the Mayberry objections are unfounded. FirstCaribbean on March 31 offered FirstCaribbean Jamaica shareholders until May 9 to exchange their shares.
Mayberry is recommending "that you do not accept the offer," Mr. Berry stated in a research paper issued to his company's clients. He said local shareholders are being asked to take less for their shares than was reasonable.
"The offer stands," Mr. Campbell said, when asked to respond to the criticism from Mr. Berry. He said, "We think the offer is fair."
Based on its income earning assets, the exchange ratio should be 3.43:1, according to Mayberry research. The book value per share suggested a ratio of 4.8:1, while the net profits in the first quarter for this year suggested a ratio of 2.7:1.
"The offer is based on share prices," Mr. Campbell said in response. "We believe the market offers the only true valuation for a listed company."
The price of a security is what a willing buyer and willing seller are will pay for it, Mr. Campbell said, and "that price is transparently shown on a stock exchange."
UNDERVALUED
The ratio of 7.5:1 was applied using prices at March 21, 2003, Mayberry stated. It said however that at that time the price of FirstCaribbean Jamaica was relatively undervalued and did not provide a fair basis of exchange for minority shareholders.
The premium for FirstCaribbean Jamaica shareholders of 13 per cent that was referred to in the offering circular from FirstCaribbean no longer exists as the trading price has moved, Mayberry stated. The company said FirstCaribbean Jamaica shareholders should get 1 FirstCaribbean share for every 5 of their own, rather than 1 for every 7.5 shares.
But such an exchange ratio would represent a 100 per cent premium because FirstCaribbean Jamaica shares traded as high as 10:1, "if you were to use the highest ratio of prices it has traded over the last 15 months," Mr. Campbell said. "If you were to use the lowest ratio of prices it has traded over the past 15 months it is about 8 to one."
The prospects for both the Jamaican bank and the regional bank are bright, but "we think one is brighter and that is the regional bank,' Mr. Campbell said. He said the Jamaican bank will not benefit as much from the synergies to be gained from regional cost cutting, and the regional bank offers shareholders a more diversified investment vehicle.
The offer is attractive to a shareholder looking at the long term potential for the business, Mr. Campbell said. As many shareholders only became to be aware of the offer two weeks after it was issued, he said, "probably we will extend the date of the offer, but we will not be changing the exchange ratio."
