CIBC sells majority stake in FirstCaribbean to GNB
Canadian Imperial Bank of Commerce (CIBC) has reached an agreement to sell a controlling stake in its Caribbean entity FirstCaribbean International Bank to GNB Financial Group.
An ex-Central Bank governor yesterday said the proposed acquisition of CIBC FirstCaribbean could be positive for the Bahamian economy if it "breaks up the cartel" in the banking industry.
James Smith told Tribune Business that the Colombia-based Gilinski Group could give The Bahamas a much-needed "shot in the arm" post-Hurricane Dorian if it created more competition in the commercial banking industry by "challenging the oligopoly" that presently exists.
Conceding that there were "more questions than answers" over the proposed sale of CIBC's regional Caribbean business, including its Bahamas operations, Mr Smith argued that the Gilinski Group should also make the same buyout offer to the Bahamian minority shareholders as it has given to the Canadian banking giant.
GNB will purchase 66.73% of the shares of FirstCaribbean, subject to the approval of local regulators.
Following the close of the transaction, CIBC will remain a 24.9% minority shareholder of FirstCaribbean and will benefit from various minority shareholder protections, as well as liquidity rights in respect of its minority stake.
Of the US$797 million deal value, $200 million will be paid in cash and the rest will be provided through secured financing by Canadian Imperial. The sale values FirstCaribbean at approximately US$1.2 billion.
In 2018, CIBC scrapped plans for an initial public offering of FirstCaribbean on the New York Stock Exchange amid adverse market conditions, stating the IPO was no longer necessary to advance its long-term strategy. At the time, the listing of 20% of the bank’s shares would have valued the company at $1.4 billion
For the Canadian bank the deal contains both positive and negative elements. The transaction is expected to result in an after-tax loss of approximately US$102 million that will be recognised in the fourth quarter of 2019, representing a reduction of the carrying value of goodwill related to FirstCaribbean.
However, CIBC’s Common Equity Tier 1 capital ratio is expected to improve by over 40 bps on closing.
Upon closing, CIBC will also realise accumulated foreign currency translation gains relating to FirstCaribbean, estimated to be approximately US$212 million based on exchange rates as of 31 Oct. 2019.
“We continue to build a relationship-oriented bank for a modern world, and this strategic transaction will sharpen our focus on our core businesses,” said Shawn Beber, senior executive vice president, general counsel and corporate development, CIBC.
“FirstCaribbean is a well-performing business and we believe this transaction will support its long-term growth prospects while creating value for its stakeholders as well as those of CIBC. As an investor in FirstCaribbean, we intend to work closely with GNB Financial Group to support continued growth for the business.”
The buyer, GNB, is wholly owned by Starmites Corporation S.a.r.L, the financial holding company of the Gilinski Group, which has banking operations in Colombia, Peru, Paraguay, Panama, and Cayman Islands with approximately US$15 billion in combined assets.
“FirstCaribbean will remain the strong entity it is today, committed to servicing its clients in the region,” said Jaime Gilinski, chairman of GNB Financial Group Limited. “I have been impressed by the strength and stability of FirstCaribbean and am excited about its prospects for the future.”
FirstCaribbean International Bank was formed in 2002, when CIBC and Barclays combined their respective retail, corporate and offshore operations in the region. CIBC became the majority shareholder and renamed the bank CIBC FirstCaribbean, after buying the Barclays stake in 2006.
FirstCaribbean’s biggest market is Barbados, with larger operations also in the Bahamas and Cayman Islands. The bank is listed on the Barbados Stock Exchange and Trinidad and Tobago Stock Exchange.
James Smith told Tribune Business that the Colombia-based Gilinski Group could give The Bahamas a much-needed "shot in the arm" post-Hurricane Dorian if it created more competition in the commercial banking industry by "challenging the oligopoly" that presently exists.
Conceding that there were "more questions than answers" over the proposed sale of CIBC's regional Caribbean business, including its Bahamas operations, Mr Smith argued that the Gilinski Group should also make the same buyout offer to the Bahamian minority shareholders as it has given to the Canadian banking giant.
GNB will purchase 66.73% of the shares of FirstCaribbean, subject to the approval of local regulators.
Following the close of the transaction, CIBC will remain a 24.9% minority shareholder of FirstCaribbean and will benefit from various minority shareholder protections, as well as liquidity rights in respect of its minority stake.
Of the US$797 million deal value, $200 million will be paid in cash and the rest will be provided through secured financing by Canadian Imperial. The sale values FirstCaribbean at approximately US$1.2 billion.
In 2018, CIBC scrapped plans for an initial public offering of FirstCaribbean on the New York Stock Exchange amid adverse market conditions, stating the IPO was no longer necessary to advance its long-term strategy. At the time, the listing of 20% of the bank’s shares would have valued the company at $1.4 billion
For the Canadian bank the deal contains both positive and negative elements. The transaction is expected to result in an after-tax loss of approximately US$102 million that will be recognised in the fourth quarter of 2019, representing a reduction of the carrying value of goodwill related to FirstCaribbean.
However, CIBC’s Common Equity Tier 1 capital ratio is expected to improve by over 40 bps on closing.
Upon closing, CIBC will also realise accumulated foreign currency translation gains relating to FirstCaribbean, estimated to be approximately US$212 million based on exchange rates as of 31 Oct. 2019.
“We continue to build a relationship-oriented bank for a modern world, and this strategic transaction will sharpen our focus on our core businesses,” said Shawn Beber, senior executive vice president, general counsel and corporate development, CIBC.
“FirstCaribbean is a well-performing business and we believe this transaction will support its long-term growth prospects while creating value for its stakeholders as well as those of CIBC. As an investor in FirstCaribbean, we intend to work closely with GNB Financial Group to support continued growth for the business.”
The buyer, GNB, is wholly owned by Starmites Corporation S.a.r.L, the financial holding company of the Gilinski Group, which has banking operations in Colombia, Peru, Paraguay, Panama, and Cayman Islands with approximately US$15 billion in combined assets.
“FirstCaribbean will remain the strong entity it is today, committed to servicing its clients in the region,” said Jaime Gilinski, chairman of GNB Financial Group Limited. “I have been impressed by the strength and stability of FirstCaribbean and am excited about its prospects for the future.”
FirstCaribbean International Bank was formed in 2002, when CIBC and Barclays combined their respective retail, corporate and offshore operations in the region. CIBC became the majority shareholder and renamed the bank CIBC FirstCaribbean, after buying the Barclays stake in 2006.
FirstCaribbean’s biggest market is Barbados, with larger operations also in the Bahamas and Cayman Islands. The bank is listed on the Barbados Stock Exchange and Trinidad and Tobago Stock Exchange.
