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Speculation mounts that CIBC FirstCaribbean is to be acquired by Gilinski Group

Press speculation continues around reports that Barbados-based CIBC FirstCaribbean is all set to be acquired by Colombia’s Gilinski Group.

The deal purportedly is to snap up 70 per cent of the Caribbean entity for around US$2.2 billion.

A subsidiary of the Canadian Imperial Bank of Commerce Group, FirstCaribbean has operations in 16 Caribbean countries, with 2,700 employees.

For the quarter ended July 31, 2009, FirstCaribbean posted revenues of US$155 million, generating net income of US$48.6 million — an increase of $10.6 million over the third quarter in the prior year.

Head of the Gilinski Group, Jaime Gilinski (Photo: Forbes)

For the period under review, CIBC FirstCaribbean posted total assets of $11.5 billion with liabilities of US$10.3 billion.

The Gilinski Group is one of the largest banking players in Latin America, built in the main from a series of audacious mergers and acquisitions.

Primarily a family-owned operation, it moved on the beleaguered Bank of Credit and Commerce International’s (BCCI) Colombian arm, snapping it up for a nominal sum back in the 90s.

With money generated from that acquisition, the Colombian banking group made a stunning bid for Banco de Colombia, purchasing it for $365 million.

In the early 90s, and with experience of mergers and acquisitions under its belt, Gilinski merged Banco Sudameris and Banco Tequendema to form GNB Sudameris which today has assets of over $10 billion.

A decade later with HSBC deciding to cease its operations in Latin America, it sold its interest in that region to the Gilinski’s GNB Sudameris for a reported $400 million in cash.

Setting its eyes beyond Latin America, the Gilinski Group in 2013 became the largest shareholder in Spanish bank, Banco Sabadell, which has $200 billion in assets.

Gilinski is not just confined to banking. The group has interests in media, having recently acquired 50 per cent of Colombia’s Semana Publications, an entity comparable to Bloomberg. Gilinski is betting on digital journalism and is looking to turn these platforms into a major force in Colombian news.

It also owns Yupi, a snack food company, and Rimax Plastics. The group has considerable real estate holdings across the world.

(Photo: theglobeandmail.com)

Forbes lists Jaime Gilinski, who heads the group, as the second-richest person in Colombia with a personal fortune of $3.5 billion. The son of a banker, the Harvard graduate resides in London and has a wife and four children.

The History

CIBC FirstCaribbean’s history in the region goes back some 250 years via its affiliation to Barclays (1836-2002) and CIBC (1920-2002).

FirstCaribbean was formed in 2002 with the merger of CIBC West Indies Holdings and Barclays Bank Caribbean’s operations. In December 2006, CIBC acquired Barclays’s stake and became the majority shareholder in FirstCaribbean.

On June 20, 2011, it was announced that FirstCaribbean would be co-branded under the CIBC banner and would become CIBC FirstCaribbean.

CIBC FirstCaribbean’s Possible Future

If Gilinski were to acquire CIBC FirstCaribbean, it would become an enviable white knight and the answer to its current problems.

CIBC FirstCaribbean has yet to establish itself as a true banking force in the Caribbean. Country managers have very little autonomy and have to rigidly adhere to policies and practices mandated by its Barbados office.

In other words, it is too centralised and does not take into account the differences and vagaries of the respective Caribbean countries.

For some years now it has been flailing and only last year was forced to abandon plans to list in New York as it went seeking to raise US$240 million through an initial public offering of 9.6 million shares with a price between US$22 and US$25 per share. The aim was to come away with a market value of $1.3 billion.

Exacerbating matters further are the woes of the Barbados economy, which has seen it having to go to the International Monetary Fund for aid and the restructuring of its heavy debt burden. Barbados is FirstCaribbean’s biggest market and serves as headquarters to the brand.

Barbados, which has had to go to the IMF, is FirstCaribbean’s largest market.

Having to confront anaemic growth in the Caribbean and regulatory risks attributed to it, not to mention a dearth of investment opportunities, FirstCaribbean, like RBC, may well feel it prudent to consider exiting the region.

Scotiabank has already taken the decision to reduce its footprint in the Caribbean, citing the need to reduce its operating costs.

Only last week, Scotiabank sold its operations in Anguilla, Dominica, Grenada, St Kitts, St Lucia, St Maarten, and St Vincent to Republic Financial Holdings, which now means that the Trinidadian entity’s asset base will grow to $14.5 billion with profits of US$260 million.

Scotiabank sold its operations in seven countries to Republic Financial Holdings

Back in 2014, FirstCaribbean was forced to delist from the Jamaica Stock Exchange (JSE) because the portion of the listed ordinary shares held by individuals other than the majority shareholder fell below 20 per cent of the listed ordinary shares; as well as the average total traded volume for the 36-month period prior to the notice from the JSE was below two per cent. With it unable to raise these metrics, it took the decision to withdraw from the JSE.

In September, CIBC FirstCaribbean closed its office in Anguilla, citing that it only had five per cent market share there.

CIBC FirstCaribbean delisted from the Jamaica Stock Exchange in 2014.

With its considerable assets, banking prowess and ability to make mergers and acquisitions work, Gilinski could be the right fit. With sixteen countries serving a population of around six million, FirstCaribbean would be a good asset to have in its portfolio and a nice way to dip its toe in English-speaking retail, corporate and investment banking.

Gilinski may well have the management chops to make FirstCaribbean a force in the region able to take on Scotiabank, Sagicor, JMMB, and the other local players looking to make their mark.

FirstCaribbean was always rigidly conservative and its managing directors stolid and competent, but not enterprising and innovative. They always seem to be beaten to the punch by younger, more dynamic players. One only has to look to outfits like JMMB, Proven, Barita and Sygnus to get the picture.

“I needed to buy a new engine for a BMW X5 and after 18 years’ banking with FirstCaribbean, I thought I would have no problem. Mind you, I never went into the red, never had an overdraft, and my account was always in tip-top condition,” said a former FirstCaribbean customer.

“They told me my loan application would have to go to Barbados and it did— they turned me down. I bumped into Keith Duncan of JMMB and told him how I was rejected by people sitting in Barbados who do not know me. He, in turn, said go to his Haughton Avenue branch in Kingston and have a chat with his people. Needless to say, I was granted the loan, paid it back and closed my account with FirstCaribbean and switched to JMMB.”.

Michael Mansoor played an instrumental role in shaping FirstCaribbean and remained at the helm from 2002 until 2013, unfortunately passing away the following year.

Since Mansoor, FirstCaribbean has had three heads, namely: Rik Parkhill, Gary Brown and now Collette Delaney.

It has yet to secure that transformational figure that can change its fortunes and make it a truly competitive force in the Caribbean.

FirstCaribbean has also been unable to hold onto top-tier talent that can help guide its fortunes while building long careers at the bank. It has been unable to retain gifted bankers like Raymond Campbell, Trevor Torzsas, Debra Lopez, Milton Brady, and Berisford Grey.

You don’t hear of the region’s top bankers relishing the prospect of wearing the FirstCaribbean badge and eyeing the prospect of working there. Some say that like Scotia and RBC, FirstCaribbean is looking to de-risk the Caribbean and reach for the parachute.

This may well appeal to Gilinski, a group that has excelled at extracting value from non-performing assets. Well capitalised and in expansive mode, FirstCaribbean may be the conduit that brings this enterprising group, which has now entered the hotel sector, into the Caribbean.