Canadian Imperial Bank of Commerce (CIBC) today announced that it has agreed to sell 66.73 per cent of its shares in FirstCaribbean International Bank to South American-based GNB Financial Group Limited.
In a press release posted on CIBC’s website, the bank disclosed that the sale of the Caribbean operation is valued at US$797 million, part of which will be secured by US$200 million in cash.
“We continue to build a relationship-oriented bank for a modern world, and this strategic transaction will sharpen our focus on our core businesses,” Shawn Beber, senior executive vice-president, general counsel and corporate development, CIBC, is quoted in the release.
“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,” he added.
Subject to the approval of local regulators, the agreement will see CIBC retaining 24.9 per cent of FirstCaribbean shares. The Canadian outfit will thereafter benefit from minority shares protections as well as liquidity rights in respect of its stake.
“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.”— Shawn Beber, senior executive vice-president, general counsel and corporate development, CIBC
According to the release, CIBC should realise an after-tax loss of CD$135 million from the transaction in its fourth-quarter 2019 results, due to “a reduction of carrying [the] value of goodwill related to FirstCaribbean”.
However, subsequent to the transaction, which is expected to be completed in 2020, the bank will realise approximately CD$280 million in accumulated foreign exchange gains related to FirstCaribbean, based on exchange rates as of October 31, 2019.
Speaking on behalf of his company, GNB Financial Group Limited Chairman Jaime Gilinski said, “FirstCaribbean will remain the strong entity it is today, committed to servicing its clients in the region.”
GNB is a wholly-owned subsidiary of Starmites Corporation S.ar.L, the financial holding company of the Gilinski Group. The Gilinski Group has banking operations in Colombia, Peru, Paraguay, Panama, and the Cayman Islands with approximately US$15 billion in combined assets.
“I have been impressed by the strength and stability of FirstCaribbean and am excited about its prospects for the future,” the chairman also said.
Founded in 2002 through an amalgamation of CIBC and Barclays PLC retail, corporate and offshore Caribbean banking operations, First Caribbean is one of the region’s largest financial institutions, providing services in English- and Dutch-speaking jurisdictions. In 2006, the “big five” Canadian bank secured a majority stake in FirstCaribbean after Barclays pulled out of the region.
Today FirstCaribbean manages US$11.5 billion in assets. With the current valuation of shares to be sold to GNB, the financial operation is estimated to be worth US$1.2 billion.
“FirstCaribbean is a strong, well-performing business that continues to grow across the region. FirstCaribbean remains laser-focused on delivering on its strategy — providing its clients with first-class service through a modern, everyday banking experience and providing its employees with the best possible work experience,” Colette Delaney, CEO, FirstCaribbean, said.