Jun 2004 Financial News

Capital and Credit pays $200m for Jamaica Unit Trust

Jun 02, 2004

Capital and Credit Financial Group is paying just over $200 million for the government's approximately 93 per cent stake in the mutual fund managers, Jamaica Unit Trust Services Ltd (JUTS), Business Observer sources say

Capital and Credit's chairman, Ryland Campbell, on Monday announced the acquisition, for which his company beat five other suitors. He did not disclose the purchase price.

But said an Observer source: "The price was over $200 million. Not very high over."

Capital and Credit will now begin work with regulators for the formal takeover of the unit trust.

Jamaica Unit Trust has been in the portfolio of Financial Institution Services (FIS), the government's debt resolution agency that preceded the Financial Sector Adjustment Company (FINSAC), having been bailed-out of a liquidity crisis as investors bolted from equities in the early 1990s during a crash of the Kingston exchange.

That market downturn, which came ahead of a broader meltdown of the financial sector, as well as substantial back-office problems that were exposed by the crisis, helped to keep the Jamaica Unit Trust in the doldrums. Its situation was not helped by growing competition in a market that it once had all to itself.

But Campbell, who received a letter last weekend from FIS informing Capital and Credit of its successful bid for the fund managers, said that the acquisition of Jamaica Unit Trust Services will add a new dimension to the range of products offered by his group in its Capital and Credit Merchant Bank and Capital and Credit Securities.

Jamaica Unit Trust operates three funds - The Income and Growth Fund; The Capital Growth Fund and The Gilt Edge Fund. But more critical to Capital and Credit is the fact that JUTS will bring to the fold 15,000 customers, who, up to last June, had $1.5 billion under management.

Capital and Credit, at the end of March, had $49.58 billion under management.

The group posted after-tax profit of $465.266 million for its last financial year, up to December 31.

In addition to the Jamaica customer base which Jamaica Unit Trust will bring to Capital and Credit, Campbell's group will also likely find of significant value a Cayman Islands mutual fund licence that will come with the purchase, according to industry analysts.

"Several Jamaican fund managers find a Cayman Islands operation useful," one analyst said yesterday. "Capital and Credit will be saved all the hassle and expense of acquiring a licence to set up a fund management operations in Cayman. It will give them flexibility."

Curtis Martin, Capital and Credit's deputy group president and president and CEO of Capital & Credit Merchant Bank, said the acquisition held substantial income-generating potential for the group and fit within Capital and Credit's organisation objectives and vision.

For instance, it will widen the group's product offering, provide risk diversification and increase its fee-based income - which in the last financial year was $73.3 million.

"In short, the acquisition is well aligned to our current business model," Martin said.

Sourcs: Jamaica Observer
http://www.jamaicaobserver.com/magazines/Business/html/20040601T230000-0500_60664_OBS_CAPITAL_AND_CREDIT_PAYS_____M_FOR_JAMAICA_UNIT_TRUST.asp