Reprinted from Caribbean Net News caribbeannetnews.com
Royal Bank buys Trinidad's RBTT to grow in Caribbean
Published on Wednesday, October 3, 2007
By Sean B. Pasternak and Frederic Tomesco
TORONTO, Canada (Bloomberg): Royal Bank of Canada, the country's largest bank, has agreed to buy RBTT Financial Holdings Ltd in Trinidad and Tobago for about $2.2 billion to more than double its Caribbean branch network.
RBTT shareholders will receive about TT$40 ($6.37) a share, 60 percent of which will be in cash and 40 percent in Royal Bank shares, Toronto-based Royal Bank said on Tuesday in a statement.
Royal Bank, which has 46 branches in Caribbean countries such as the Bahamas and Cayman Islands, is taking advantage of a soaring Canadian dollar to expand in that region, joining Bank of Nova Scotia and Canadian Imperial Bank of Commerce.
"Canadian banks are strong in the Caribbean," said Ian Nakamoto, director of research at MacDougall, MacDougall and MacTier Inc. in Toronto, which manages $4.3 billion, including Royal Bank shares. "They have a good history in that area."
RBTT has $7.5 billion in assets, employs 5,400 and serves 1.3 million clients. Its acquisition will boost Royal Bank's Caribbean assets to $13.7 billion, spread out across 130 branches and 18 countries. W Holding Company Inc., the owner of Westernbank Puerto Rico, is the biggest bank in the Caribbean, with assets of about $17.5 billion as of March, Royal Bank said.
"The acquisition is advantageous in that it expands Royal Bank's presence in the growing region at a time when there are becoming fewer reasonable targets," Dundee Securities Corp. analyst John Aiken said in a note to clients.
Royal Bank is trying to catch up with Canadian rivals in the Caribbean. Scotiabank runs more than 200 branches there, and last year the Toronto-based bank spent $56 million to buy Jamaica's Dehring Bunting & Golding Ltd. CIBC has spent $1.3 billion since last year to increase its stake in Barbados-based FirstCaribbean Bank to 91.4 percent.
Adding RBTT also may allow Royal Bank expand to Latin America, said Peter Armenio, head of US and international banking for the bank.
The transaction "provides a platform for future expansion beyond the Caribbean, as we start to took at other places around Central and Latin America where we do have other businesses," Armenio told analysts on a conference call. He didn't elaborate.
RBTT has Canadian roots. It was incorporated in Halifax, Nova Scotia, in 1856 and was owned by Royal Bank before the lender sold control in 1986, said Brad Smith, an analyst at Blackmont Capital in Toronto.
"We believe this renewed commitment would signal the emergence of a new, capable market competitor," Smith wrote in an October 1 note to clients. The proposed transaction was reported by the Trinidad and Tobago Express newspaper on September 30.
The Port of Spain-based bank was ranked first in Trinidad and Tobago for capital adequacy by financial publication The Banker, according to RBTT's website. In April, RBTT said it was considering a possible combination or partnership for its business, according to its website.
Royal Bank said its offer is 18 percent more than the closing price of RBTT shares on September 28. Royal Bank shares rose 60 cents to C$56.53 by 4 p.m. in Toronto Stock Exchange trading today. RBTT shares rose 99 cents to TT$35.
The transaction will probably close by mid-2008 and bolster per-share earnings next year, Royal Bank said.
