Cayman bank shareholders agree to sell 54 percent of stock to regional group

Cayman National Bank, Grand Cayman

GEORGE TOWN, Cayman Islands (CNS) — The Republic Bank of Trinidad and Tobago (Barbados) Ltd has bought a majority share in Cayman National Corporation (CNC), the largest financial services company in the Cayman Islands, just over two months after it made an unsolicited offer.

An announcement from Republic said that at the end of business on Friday it had received notice from Cayman National that shareholders were willing to sell more than 54 percent of the bank, which at $6.25 per share amounts to more than $140 million.

However, an announcement from Cayman National revealed another special meeting on November 7 to make a further amendment to the bank’s articles to complete the transaction because of an “administrative oversight”.

Before Republic can take over, Cayman National needs to address the bank’s current limit on share transfers, which was not dealt with during the last extraordinary meeting. The shareholders are being asked to vote for an amendment to the Cayman National articles of association limiting the number of shares that can be acquired by way of share transfer.

Subject to the regulatory approvals and this administrative change, Republic has now acquired control of the bank and is still seeking to buy up to 74.99 percent of the ordinary shares, and shareholders who have not yet agreed to sell have until 5pm Monday to sell.

The current president of CNC told shareholders that Republic had indicated it planned to leave things, such as staff and the board at the bank, as they are for a while, as it is a very profitable business, in order to get a return on their investment. They also stated in notices that the bank’s name will not be changed for at least the next five years.

But as the majority shareholder, Republic is now in control and will be able to act in its own interests including, if it acquires the remaining 20 percent shares it wants, merging or selling the institution and forcing minority shareholders to sell.

Although a majority of shareholders have voted in favour of the sale, the deal has continued to cause controversy, with one local family, still a significant shareholder, not supporting the takeover and many smaller shareholders making it clear they want the bank to remain in local hands. Cayman National was the last locally owned retail bank.

One shareholder of Cayman National Corporation, who asked to remain anonymous, claims that the deal can still be stopped if shareholders vote against the amendment to the Cayman National Articles of Association at the meeting next month. To do this, he said, small shareholders must withdraw their proxy vote from the board.

He also wants a vote of no confidence in the board because, he claims, with one exception, they don’t know what they are doing, and he is also urging the government and the Cayman Islands Monetary Authority (CIMA) to stop the sale of the bank to Republic because it will harm the reputation of the Cayman Islands.

The CNC shareholder said that CLICO Investment Fund (CIF) is a major shareholder in the bank and the Trinidad and Tobago government is a major shareholder in CLICO, which would give an OECD blacklisted government a foothold in the Cayman Islands. The government, he said, should do its due diligence and find out exactly who owns shares in Republic and also in CLICO.

He said that Trinidad has a major problem with their foreign exchange, and buying into CNC would be a way to circumvent their own failed national monetary policy. However, he claims that this could be catastrophic for Cayman because the US Securities and Exchange Commission (SEC) and the European regulators could shut down SWIFT participation and correspondent banks.

The premier and CIMA should look into this situation and not approve the sale, the shareholder said, because of the danger it would bring to this country, especially when they are in the middle of negotiations with Brussels and in the process of assuring Washington, DC and London that Cayman is an open and trustworthy jurisdiction.

He said that this deal is also not good for the majority of shareholders, who have been blindsided by the board and will regret it if this deal goes through. He said the shares are kept artificially low by only listing the bank on the Cayman Islands Stock Exchange and would be worth much more if the bank was listed on an international stock exchange.

“The directors have not fulfilled their responsibility to maximise the share price,” he said, but added that he does not doubt their honesty or integrity but believes that they do not know how to run a business.

The sale is also not good for bank staff, he said. The directors have argued that the alternative to selling to Republic is consolidation with another bank, which will lead to staff loss. However, although the deal stipulates that the fundamental operation of the bank will remain in place for five years, he said that this is no time at all in the life of the bank and will ultimately result in downsizing of local staff.

“There is always a caveat to a caveat,” he said, indicating that Republic will find a way around this agreement anyway to lay off staff.

Meanwhile, some of the directors, who are selling most of their shares but retaining enough to keep their seat on the board, will continue to earn fees as directors with the option to acquire more, he said.

The shareholder said that before the upcoming extraordinary general meeting on November 7, all shareholders should withdraw their proxy vote and use it to stop this sale by voting no to the amendment, and then vote in a new board.

He is suggesting that they all meet before the November 7 EGM to discuss the situation. Before this, the board should give each shareholder a copy of the articles of association and a copy of the side agreement concerning the governing of the bank over the next five years.

Republished with permission of Cayman News Service



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