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The Voice

LoJ takeover good news, says Donovan Perkins
published: Wednesday | November 10, 2004

By Dennise Williams, Staff Reporter

PAN CARIBBEAN Financial Services (PCFS) is poised to spread its wings in Jamaica and at least 20 Caribbean countries through its association with its ultimate parent company, Sagicor, which is the parent company of Life of Jamaica (LoJ).

Life of Jamaica currently owns nine per cent of PCFS. Last week, LoJ announced that it had signed agreements with the majority shareholders to take control of the company. "We at LoJ do a lot of banking business and PCFS will benefit from that," Richard Byles, chief executive officer and president of LoJ and chairman of PCFS told Wednesday Business. "Also, PCFS has applied for a seat on the Jamaica Stock Exchange. I believe that application will be looked upon favourably and we will have a stock brokerage firm.

If mutual fund legislation becomes settled by next year, then PCFS, along with many other players in the financial market, will be competing in that area," he said. "Since Sagicor has a presence in 20 Caribbean countries, it is natural that the PCFS brand will be positioned in those countries."

Donavan Perkins, president and chief executive officer of PCFS agrees. "Our relationship and LoJ's shareholding in PCFS will be a tremendous asset for our institution," Mr. Perkins said. "With LoJ soon to have a controlling interest in PCFS, pending regulatory approval and Sagicor having 37 per cent of the company, this creates the platform for us to expand rapidly throughout the Caribbean."

TIERED OWNERSHIP STRUCTURE

Mr. Byles explained the proposed tiered ownership structure that currently awaits the approval of the regulatory agency, the Financial Services Commission (FSC).

"It is well known that LoJ and First Life Insurance Company are waiting on approval for First Life to sell their insurance business to us, in addition to selling us their 37 per cent shareholding in PCFS," Mr. Byles said. "If the FSC gives us approval, then we will own 46 per cent of PCFS."

The LoJ boss said the Matalon and Melhado families have agreed to sell their 43 per cent shareholding in PCFS. This accounts for 89 per cent of the PCFS shareholding. "LoJ is taking up only five to seven per cent of that ownership to get a 51 per cent ownership," said Mr. Byles. "The rest, about 36 per cent, will be owned by Sagicor."

Mr. Byles said that LoJ would not be repeating past mistakes made in the financial sector, where insurance companies and banks developed incestuous ties. "LoJ has to be careful not to over-invest in the banking sector and so we believe that a prudent level of ownership is 51 per cent." However, since Sagicor is the parent company of LoJ, it will be the de facto owner of PCFS if the First Life deal gets approved. "Investors should look very carefully at the possibilities that arise from the local and regional opportunities and synergies through these relationships," Mr. Perkins said. He added that, "What you are seeing is the emergence of another significant and powerful regional player. The possibilities are very interesting and exciting, especially for the younger managers in all these organisations."

To fulfill stock exchange rules, LoJ will have to a make an offer to other shareholders of PCFS to buy out their interest. However, Mr. Perkins does not think that this amounts to the demise of PCFS as a publicly listed firm. "I believe that LoJ and Sagicor are committed to leaving PCFS as a listed company. All our staff are, or will shortly become shareholders, and having a stake in the company is very attractive to all our staff and management."

The total PCFS deal is valued at US$50 million.

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