BNS shareholder Crafton Miller (left), an attorney-at-law, in discussion with executives of the bank, from left, president William Clarke, senior vice-president and legal counsel David Noel, chief financial officer Stacie-Ann Wright and senior vice-president for wealth management, Anya Schnoor, at an investors briefing, Knutsford Court Hotel in New Kingston on Tuesday - Rudolph Brown/Chief Photographer

Ashford W. Meikle, Business Reporter

Scotiabank Jamaica executives acknowledged Tuesday that minority stockholders of the bank could see their shares diluted under its restructuring plan but insisted that it was a good deal overall, amid investor concerns about what the new dividend policy will look like.

The bank, anxious to reassure shareholders who will vote their approval of the new direction in a week, said the value of holdings were not at risk as investors would at the end of the process be sharing in a 'larger pie'.

The bank is creating a new holding company, Scotia Group, under which the operations of BNS Jamaica and new acquisition Dehring Bunting and Golding will be held.

"I do recognise that this will result in some dilution of the interest that minority shareholders hold as a percentage of Scotia Group but the underlying values of those shares should not change," said senior vice-president and legal counsel of Scotiabank Jamaica, David Noel.

"In essence shareholders will have a smaller percentage share in a larger pie."

Additional shares

Noel at an investor's briefing in Kingston said BNS Canada would release its 52.74 per cent contingent interest in DB&G in exchange for additional Scotia Group shares once the scheme of reconstruction had been completed. BNS Canada and BNS Jamaica together own 68.54 per cent of the investment bank. Minority interests hold the other 31.46 per cent of shares.

The exchange price will be lower than current market value of the DB&G stock, BNS indicated yesterday.

To determine the number of shares that BNS Canada will hold in Scotia Group, the local bank will take into consideration the $3.5 billion its parent company spent to acquire the DB&G stake as well as the average market price of DB&G - $19.08 - in the six months prior to the takeover bid last October.

DB&G traded down three cents yesterday to $25.50; BNSJ was also down 80 cents to $25.30.

Market analysts said the proposal appeared to be a fair deal but economist and publisher John Jackson noted there have been murmurs of discontent among some minority shareholders.

BNS Jamaica acknowledged the concerns but still argued that Scotia Group would be in a better position to fully take advantage of potential synergies and grow the wealth management business through DB&G, thereby generating greater shareholder returns in the future.

Almost three weeks ago, the bank announced its intention to establish the holding company, Scotia Group, of which BNSJ and DB&G would be subsidiaries.

Next Wednesday, February 28, the bank will hold an extraordinary general meeting, following its AGM, seeking the approval of the requisite majority of shareholders to support its application to the Supreme Court for its "Scheme of Reconstruction."

Once the scheme has been sanctioned, Scotia Jamaica would become a wholly owned subsidiary of a newly formed holding company, Scotia Group Jamaica Limited.

Existing shareholders will receive one Scotia Group ordinary share in exchange for every one ordinary share held in BNSJ, plus a bonus one BNSJ preference share for every 30 ordinary shares held in the bank.

"The existing BNSJ ordinary shares will be cancelled and de-listed. New BNSJ ordinary shares will be issued to Scotia Group which will own BNSJ 100 per cent," the bank said in a statement.

Scotiabank Jamaica argues that the reconstruction is necessary because it holds a contingent interest of only 15.8 per cent of the shares in DB&G, which means that its minority shareholders would not fully participate in or benefit from the DB&G acquisition.

Wealth management is critical to the long term strategic objectives and plans of the bank, said president Bill Clarke on Tuesday.

"It is important to note the idea of the DB&G acquisition came out of the strategic planning of Scotiabank Jamaica Limited and it is therefore fitting that all Scotiabank Jamaica shareholders should benefit from the enhanced value expected from this important acquisition."

The reconstruction will more full the ownership of BNSJ and DB&G under the new corporate umbrella Scotia Group, which will facilitate the efficient management and direction of both entities, the bank said.

"You are no worse off; your value has been preserved," insisted Noel.

"The key thing, though, looking forward is we expect the values to grow with the synergies and I think that is why the market has reacted positively to the acquisition," Noel reiterated in his attempts to reassure minority shareholders.

ashford.meikle@gleanerjm.com