The
investment bank, Dehring, Bunting & Golding has won the bid for Eagle
Unit Trust, edging out a dozen other groupings which had made written
offers for the highly liquid institution. "There
was an open bid and as you know we were selected two weeks ago,"
Garfield Sinclair, DB&G's vice president confirmed yesterday. DB&G
which bid $115 million for the management company that runs the two funds
that make up the unit trust, has been undertaking a due diligence study to
ensure the integrity of the Eagle preliminary numbers on which it had
based its bid. "We
are now undertaking the due diligence process. They are fairly straight
forward assets and hence we should get to the bottom fairly quickly,"
said Sinclair. Eagle
Unit Trust, was one of three diamonds left in Paul Chen Young's empire
that crumbled in March 1997. The other was the commercial bank. At
the end of September, the unit trust's premium and growth fund had $91
million, and the money market fund $1.68 billion. The unit trust had 7,000
clients, and reported profit of $13 million for the year to June 30, 1999. While
DB&G will be able to consolidate the huge portfolio of business under
one management to create a more efficient operation for the trust,
Sinclair believes that the 7,000 customers will add a new dimension to the
D&G family. "We
plan to add Eagle Unit Trust to our family of financial institutions, and
it will enable us to add a very attractive product to a market of a more
retail clientele. It is not our traditional market." It
is the possibility for synergy that Sinclair believes will enable DB&G
to eke out more profit from EUT than it now currently makes just by
creating a better spread on its overhead. "The
synergy is the fact that we are pretty much doing the same thing. We will
enjoy economies of scale from spreading the overhead, and will have 7,000
clients to whom we can cross-sell our other products," explained
Sinclair. Bullish
about what is his second major acquisition within a year, Sinclair
stressed that the EUT portfolio would provide DB&G with a launch pad
for a renewed attack on the mass end of the market. "We
will crank up the market. Our plan is to aggressively grow the fund. We
want to double the size within 12 to 18 months." Last
year DB&G consummated the acquisition of 51 per cent of Billy Craig
Merchant Bank, which it now operates as a wholly owned subsidiary called
DB&G Merchant Bank. If
there is any lesson to be learned from the Billy Craig acquisition, it is
the importance of due diligence study. At the time when DB&G decided
to acquire Billy Craig, the merchant bank reported a small positive
shareholders' equity. But on closer examination, DB&G discovered that
there was a huge capital deficiency at the institution. It required the
intervention of FINSAC to make the takeover feasible. FINSAC is now a 49
per cent partner in the merchant bank. DB&G
plans to leverage its branch network to deepen its foray in the money
market business. In fact, Sinclair believes that the company's presence in
Montego Bay, Ocho Rios, Sav-la-mar, Mandeville, and Kingston gave it a
competitive advantage in the bidding process - over giants like Jamaica
Money Market Brokers. "The
vast majority of the clients are in the rural area," said Sinclair.
"We are the only ones that bid who had a branch network." DB&G
currently has $8.1 billion under management with roughly 2,000 clients,
and total balance sheet assets of $8.5 billion. For the nine months to
September 1999, the company reported net profit of $32.7 million, compared
with $20.2 million the similar period last year. At the end of September,
shareholders equity stood at $227 million. Sinclair
could not be definitive about how the new asset would be structured into
the group, though the most likely outcome, he said, would be as a wholly
owned subsidiary of DB&G Limited. Eagle
Unit Trust was initially acquired by a consortium of Pan Jamaican Group
and Seprod, when it was first auctioned by the government. But after the
tax authorities decided that the gains earned by the investors in unit
trust products were subject to tax, the consortium said it was no longer
interested in the firm at that price. The
consortium recommended that the government ask for new bids, but
apparently that request was not accommodated. DB&G was among the next
two highest bidders. Pan
Caribbean and Seprod did not bid again. November
3, 1999 We value your feedback
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