Mar 2007 Financial News

FCIB investors can force CIBC to make offer - regulator

Mar 02, 2007

Four regional securities regulators have told FirstCaribbean investors to seek legal advise, charging they were denied the opportunity to sell their shares to CIBC under terms agreed by the Canadian bank.

In fact, FCIB minority inves-tors can force the company to buy their holdings through the courts, but the action has to be filed in Trinidad, said Jamaica's George Roper, senior director of securities at the Financial Services Commis-sion.

CIBC's corporate headquarters' promised comment on whether it would be making a new offer did not materialise by press time.

The regulators went public late Friday after the market closed, but on Monday First-Caribbean International Bank and FCIB Jamaica's stocks both dived on the Jamaica Stock Exchange, losing $11 and $3.49 respectively.

On Thursday, FCIB Jamaica stock was at $21.51, and FCIB at $115.

Last December, CIBC acquired 43.7 per cent of Barclay's Bank's stake in regional bank FirstCaribbean International for just under US$1 billion, pushing its holdings above 87 per cent. The takeover was done through a subsidiary company, CIBC Investments Cayman Limited (CICL).

It subsequently made a mandatory offer on December 22 to acquire minority shares at US$1.6335 per share, announcing a month later at the end of January that subscriptions to that offer had boosted its holdings to 91.49 per cent, leaving 8.51 per cent in the hands of minority interests.

The bank then declared the takeover closed and advised that it was committed to "maintaining a strong minority ownership in FirstCaribbean."

Three months timeline

But last week, the securities commissions of Jamaica, Barbados, Trinidad and the Eastern Caribbean alerted investors to a clause in the takeover document that committed CIBC to a timeline of up to three months before the offer can be withdrawn.

Roper said once CICL had secured more than 90 per cent of the shares, the company was legally obligated to make another offer, in essence to take another shot at landing the other 8.51 per cent, for 100 per cent of the holdings.

The Canadian bank advised regulators on February 2 that it had acquired more than 91 per cent of FirstCaribbean. That outcome, said Roper, should have triggered another written offer to investors within a month, or by March 2, giving them a 60-day window after the notice to sell their shares.

"The notice to shareholders: shall set out a price that the offeror is willing to pay for the securities; give the basis for arriving at the price; state the location where any supporting material used for arriving at the price may be examined ...," said the four regulatory bodies.

The release was signed by Roper, Virginia Mapp from the Securities Commission of Barbados, Everette Martin of the Eastern Caribbean Securities Regulatory Commission, and Terrence Clarke of the Trinidad and Tobago Securities and Exchange Commission.

Roper said CICL had chosen, and the regulators had agreed, that its offer would be issued in accordance with Trinidad's rules, specifically number 26 of the Secuirties Indstry (Take-Over) By-Laws 2005 of Trinidad and Tobago.

The FSC endorsed that idea, said Roper, because Trinidad "offers stronger protection" for shareholders.

Its rules allows minority investors to petition the court for a "fair valuation" of their stock, and can ask the court to set a price for the shares if they are dissatisfied with the offer from the bidder. Jamaica's do not.

Breach of agreement

The securities regulators have been holding discussion with CIBC on what they see as a breach of the offer agreement, led by the Barbados, headquarters of FCIB, said Roper. Trinidad is also engaged in those discussions with CICL "to draw to their attention that they have these provisions."

Notwithstanding, they went ahead and issued a press release, also "to ensure that investors were made aware of the provision."

CIBC now owns more than 1.39 billion of FirstCaribbean's 1.5 billion of issued shares.


Source:
The Jamaica Gleaner
Friday 2nd March, 2007

http://www.jamaica-gleaner.com/gleaner/20070302/business/business2.html