Caribbean Bank Merger Close To Realisation

by Leroy James, Tax-News.com, New York

05 August 2002

The banks say that FirstCaribbean will bring together two complementary and leading financial services businesses in the Caribbean, offering customers enhanced products and improved and extended access to banking services in fifteen countries.

Now, following extensive discussions with regulatory authorities and staff unions, CIBC West Indies Holdings Limited, and its public listed subsidiaries, CIBC Bahamas Limited and CIBC Jamaica announced last week that the process had begun of notifying and seeking approvals from their shareholders in connection with the proposed combination.

CIBC West Indies and CIBC Bahamas also announced details of a proposed $62 million rights issue for CIBC West Indies and a proposed $18 million rights issue for CIBC Bahamas.

The banks said that the benefits of the merger would include:

• The combination of the banks' respective strengths in domestic retail banking in the region, which should create additional product sales opportunities across a wide range of retail financial service capabilities.
• The combination of the banks' strong franchises in domestic corporate banking in the region, coupled with the extended customer base and distribution capability.
• The successful track record of Barclays in selling offshore products and the application of this capability across a larger FirstCaribbean customer base.
• Annualised synergies expected to be over $60 million pre-tax per annum by the end of the first three years of operation after completion of the combination. Cost savings are to be sourced from the combination of infrastructure, IT savings, removal of duplicated central costs and limited branch and office co-location.

The banks said they expected to incur total one-off restructuring and integration costs of some US$70 million by the end of 2004. The various operating units have entered agreements to perform the merger, but they are still conditional on obtaining the necessary consents from governments and regulatory authorities: "There is no guarantee that such conditions will be satisfied or waived or that the Combination will proceed. The rights issues are conditional on, among other things, implementation of the Combination," said CIBC West Indies.

President of the Bahamas Financial Services Union, Tyrone Forbes, admits that there is duplication of jobs in the different banks, and that some streamlining of operations is inevitable. He says the union's focus was to make sure that its members were protected and fairly treated before this happens. Barclays gave the Union negotiating rights shortly after the merger was announced last year, but CIBC has yet to do the same. Negotiations between Barclays and the Union appear to have reached a satisfactory result, with the assistance of the Bahamas' government.

"Right now the staff is still 'walking in the dark' so to speak because they don't know everything, all we really know is that Barclays and CIBC are coming together," Mr. Forbes told the Nassau Guardian. "The vision of this company has not been relayed to the staff, what is expected for the future, the planning, nothing has been said to us. I believe the staff has a right to know."

Barclays and CIBC management have agreed to mount a number of seminars later in August to outline to staff what will be happening with the new company.

"I honestly think that this is something that should have been done prior to legal day one and not after," Mr. Forbes said. "At some level, that just shows that is a blatant disrespect and non-concern for the staff. It's like they believe that we should do as they say, go forward as they say, don't worry about it because where we are going is none of your concern, we'll tell you when we feel we are ready for it."

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