- Winston Sill/Freelance Photographer
O.K. Melhado, left, a director of Manufacturers Sigma Merchant Bank (MSMB), with Donavan Perkins, president and CEO of Pan Caribbean Financial Services, centre, and Peter Melhado, MSMB president and CEO, at Pan Caribbean's 20th anniversary party held last year.
Al Edwards, Business Co-ordinator
WITH ALMOST 15,000 clients between them, the formal merger between Pan Caribbean and Manufacturers Sigma Merchant Bank (MSMB) is expected to be announced sometime next week, Sunday Business has learnt.
The merger will, in effect, create Jamaica's largest merchant banking entity and further the consolidation that has taken place in the non-deposit-taking banking sector.
All indications are that Pan Caribbean Financial Services president and chief executive officer, Donavan Perkins, will head the bank with Anya Schnoor and Peter Melhado taking up senior management positions and possibly seats on the board of directors.
Only last month Pan Caribbean Financial Services' chairman, Richard Byles, speaking with the Financial Gleaner said: "There are a number of reasons behind the merger. One, bigger often means more efficient and, two, the benefit from the consolidated capital base of the two companies. The Financial Services Commission (FSC) and other regulators are going to require more capital in companies like mine. But we are not weak from a capital standpoint though. Both firms are highly capitalised."
MSMB has a capital base of $1.1 billion, while Pan Caribbean has a capital base of $1.28 billion. MSMB, essentially a family-owned business headed by the Matalon and the Melhado families, reports a net income of $361 million with Pan Caribbean reporting a net income figure of almost half that, at $170 million. For the nine months to September 30, 2003, earnings per share (EPS) of Pan Caribbean stood at $0.67 with assets under management of $18 billion.
Peter Melhado is credited with doing a fine job at MSMB and, under his stewardship, reports an EPS figure of $3.10 with assets under management of $23 billion. He will be playing a key role in the operations of the new bank.
Commenting on this merger Mr. Melhado said earlier: "Pan Caribbean is a good fit with MSMB.We both have a high degree of institutional client overlap. You know that Jamaica is a small country so we deal with the same corporations and pension funds. We can serve both of those customers in a more focused way. There is little overlap in individual investors. So the new entity will have more opportunities to build a larger individual investor base. Both companies have been looking at combining their operations for sometime. And both firms have done acquisitions and mergers in the past so this is not a new experience.
"Culturally, we are a good fit. We have worked quite a lot with Pan Caribbean before and there is a high level of comfort with the directors of both firms. Both entities have a young staff and there is a common level of understanding between both banks. We have had many years to get to know each other before the idea of a merger even came up. MSMB has a strong branch network, we have branches in Savanna-la-Mar, Mandeville, Montego Bay and Ocho Rios. We want to build on that.
"Another area that we want to look at in the merged entity is market leverage. An inherent weakness of a small entity is that in a very competitive market, they don't have enough leverage to spend the required levels of funds on advertising and technology. The merged institution can."
Pan Caribbean has approximately 65 employees with MSMB having 110. The merged bank is likely to reduce its staff complement .
Addressing this concern, Mr. Byles said: "It is natural that the merged entities will need less employees but I cannot say at this time how many staff members will be cut. However, we get to select the best employees from both entities and that is very important in banking."
The new bank will be looking to establish a presence in the wider Caribbean and the name "Pan Caribbean" seems remarkably appropriate. Though an agreed trading name has yet to be announced "Pan Caribbean" appears to be a strong contender. Recently Pan Caribbean spent a significant sum refurbishing and relocating its banking arm on Knutsford Boulevard and this may well serve as the merged bank's headquarters. The merged entity will almost likely be listed on the Jamaica Stock exchange though as yet there are no indications as to its listing name.
MSMB has more retail customers whereas Pan Caribbean has nore corporate customers thereby making it a good fit.
