The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian investment bank is simultaneously closing the $40m financing for its management buyout while pursuing a Cayman acquisition that will “more than triple” its pension business.

Michael Anderson, pictured, RoyalFidelity Merchant Bank & Trust’s president, told Tribune Business yesterday that he expected to close the $20m preference share capital-raise this week once “final confirmations” were received from potential investors.

This will combine with $20m in equity financing, put in place in December, to finance the investment house’s management-led buyout from Royal Bank of Canada (RBC) and its Fidelity parent group.

With Royal Fidelity now also completing the documents required to obtain approval from the Central Bank of The Bahamas and Barbados regulators, where it also operates, Mr Anderson said he hoped the transaction will close by mid to late April.

He then revealed that the now-independent investment bank is effectively pursuing two parallel paths at the same time, for it is aiming to close the acquisition of its former parent group’s Cayman Islands-based pension administration within weeks of closing its own buyout.

Mr Anderson told this newspaper that the Cayman deal, once completed, would “more than double, maybe even triple” RoyalFidelity’s portfolio in terms of “pension lives” covered, adding 10,000 clients to the existing 4,000 it has presently.

Around $140m in assets under management will come with the Cayman deal, with the RoyalFidelity chief confirming that the acquisition will provide a springboard for the investment bank’s planned Caribbean expansion over the next five to ten years as it seeks to roll-out its investment banking products and services across the region.

“I’d hoped it would all be finalised by now, but we’re very close to closing it,” Mr Anderson told Tribune Business of the capital raising to finance RoyalFidelity’s buyout from its previous owners.

“We’re only waiting for a few confirmations in terms of final investors. Our equity financing component has been closed since December, but on the preference shares we’re waiting for a few extra investors to confirm. For sure we expect to have it closed by the end of this week.”

The matching $20m contributions from equity (shareholders/investors’ own money) and preference shares (debt capital) will give Mr Anderson and RoyalFidelity a total $40m to finance the investment bank’s purchase.

“Then we are finalising the documents to the Central Bank so they can go through their final processes,” he added of the necessary regulatory approvals. “We expect this transaction to close in the next two to three weeks, so mid to late-April is a reasonable timeframe.

“I was hoping for the end of March, but it’s much more involved getting documents together for investors and directors. When you have to get certifications together it always takes longer than people think.

“People in The Bahamas, Barbados and Cayman are pulling together documents. The regulator has been supportive and helpful in the process of trying to get them what they asked for. We expect that once we get them the documents they will be good about processing it and it will not take long.”

RoyalFidelity, though, has not taken its eye off potential expansion opportunities despite being pre-occupied with raising the financing - and completing the regulatory approvals process - for its management-led buyout.

Mr Anderson revealed that all documents required to complete the acquisition of its former Fidelity parent group’s Cayman-based pension business should be executed by early next week, with the deal closing around end-April once the necessary regulatory approvals are forthcoming.

“We’ve finalised the agreement with Fidelity in terms of buying the Cayman pension business, and are in the process of getting those documents executed,” he told Tribune Business. “I hope, if not this week, by early next week we will have all the documents completed for that transaction and then get the approvals to take over that business.

“We don’t anticipate any issues in taking over the pension business in Cayman. Once we sign the agreement it’s a matter of taking it to the regulators and getting the licence. I don’t expect it to be much past the end of April before we get it completed.”

Mr Anderson disclosed that the Cayman deal will significantly expand RoyalFidelity’s group-wide pension business. “It more than doubles our pension lives, maybe more than triples them,” he said. “We currently have around 4,000, and down in Cayman there are approximately 10,000.

“It significantly changes that aspect of our business, and gets us into being one of the largest pension administrators in the Caribbean. We see the Cayman pension business as a significant component of our strategy to take our pension administration, asset management business across the Caribbean over the next five to 10 years.

“Around $140m in assets under management come with that business. The assets under management add into our current asset management business. One of our key strategies is to grow our assets under management business, and this comes with that. We can provide services in other markets.”

Mr Anderson said RoyalFidelity already provided pension administration services to the Cayman business when it was part of the Fidelity group, and explained that this deal now enabled it to take over the assets, revenues and underlying earnings associated with the portfolio.

Some three to four Cayman-based personnel will join RoyalFidelity as part of the transaction, and Mr Anderson added: “The plan for Cayman is to start providing more of the products and services we do in The Bahamas, and look at how we can position to sell investment banking products, mutual funds and so on.

“It’s more a three to five-year strategy for us in Cayman as to how we fill it out. We’re all excited about the prospects.”

Mr Anderson said RoyalFidelity’s move from Frederick Street to its new offices at Providence House on East Hill Street had now bedded down, with the initial transition and moving issues already worked through.

He added that the move had provided both staff and clients with better parking than what was available in the heart of downtown Nassau, and said market reaction to RoyalFidelity’s buyout from its parent had been positive.

“We’ve had a lot of people congratulating us,” Mr Anderson told Tribune Business. “I’ve not seen a lot of concern from people in terms of the change. It’s generally been well-received. In Barbados, it’s similar.

“People expect us to do largely what we have been doing. The change has taken place at the shareholder level, but the majority of the products are still the same as they have been for a number of years.”