The proposal by Republic Bank Financial Holdings Limited (RFHL) to purchase minority shareholders’ shares in Republic Bank (Grenada) Limited (RBGL) is a unique offer that can benefit many, according to Medford Francis, Senior Manager, ECFH Global Investments Solutions Ltd., the Lead Broker for the share purchase.
RFHL already owns 51 percent of RBGL and is seeking 100 per cent shareholding in the Bank. It is offering to purchase shares at the price of EC$45 per share, twenty times current earnings per share.
The transaction will inject approximately EC$33,090,750.00 or US$12,255,833.33 into the Grenadian economy.
The offer is very fair, says Francis, “The $45 offer is an excellent price in the current economic environment. Essentially, RFHL is offering to match the current listed price of the shares even though the market is illiquid and even though recent valuations have put the value of the shares at a lower price. In fact, the three-year return for shares has been a negative 12.38% factoring in dividends and capital depreciation.”
“A shareholder is highly unlikely to get a better price for the shares,” he says.
Minority shareholders who have been actively seeking an opportunity to cash in their shares have been unable to do so due to a lack of purchase offers, which has prevented minority shareholders from being able to sell.
The purchase offer from Republic Financial Holdings provides them with a ready market for their shares.
Shareholders have indicated a variety of reasons that make a share sale attractive. They can get cash in hand or gain liquidity to invest in other investments, locally or even regionally.
In many cases, Grenada’s economic situation has put shareholders in difficult financial straits, so selling shares may help in a time of need, particularly given the non-payment of dividends for 2013 and 2014.
Responding to questions about the implications of the proposed 100 percent shareholding, Ronald F. deC. Harford, Chairman of RFHL, says Grenadians should not be concerned.
“Our track record shows that Republic Bank Grenada will always have the interests of Grenada and Grenadians at heart,” says Mr. Harford, who was born in Grenada.
“We have held the majority in the Bank for many years and we’ve always been there for Grenada. Nothing about that will change,” he says.
Republic has held the majority shareholding in the Bank since 1993, and according to Mr. Harford, Grenada has experienced many positive benefits associated with that ownership through the introduction of modern day banking practices and unmatched customer service.
“With 51 per cent, Republic is already the effective owner of the Bank. So what is being proposed is really a deepening of that ownership,” says Mr. Harford, “100 per cent ownership will allow us to increase our investment in Republic Bank Grenada”.
“We will enjoy economies of scale that will allow us to move forward with investments in technology and human resources, to provide an even better service to the Grenadian public”, he remarked.
“Given the current banking landscape, this is critical. It will help us become more competitive, it will ensure the long-term viability of the Bank and it will enhance the stability of the Grenadian banking sector as a whole,” he said.
Two major international banking players have recently contracted their operations in Grenada. According to Mr. Harford, RFHL, on the other hand, is moving to invest more in the sector, based on its belief in Grenada’s long-term prospects and the resilience of the Grenadian people, despite ongoing challenges.
“I believe this offer is a statement of commitment and it is something I think we should perceive as support in an era where banking is under some pressure,” says Mr. Francis, “we have seen what has happened with the medium banks, for example. Down the road, there is clearly some sort of retraction of banking interest in the Caribbean. Even those that have remained are scaling down. I believe banking is at a stage where you need that injection from outside as RFHL is proposing.”
Shareholders have until 3:00 p.m. on June 10th, 2016, to accept the Republic Financial Holdings Limited’s offer to purchase shares.