FIRST Global Financial Services (FGFS) will more than triple Proven Wealth’s funds under management when they merge.
The $3-billion deal will see Proven Investments Limited’s take the securities dealer off GraceKennedy’s hands — minus the Jamaica Stock Exchange (JSE) licence, which the larger conglomerate will keep.
But FGFS fits neatly within Proven’s strategic framework.
Since purchasing Guardian Asset Management for US$16.3 million (or $1.4 billion at the time) in 2010, Proven trimmed the US$180 million (over $15 billion in 2010 dollars) in assets the company had on its balance sheet down to around $4 billion today, while a small off balance sheet asset (of less than $1 billion) grew to $25 billion.
FGFS has $22 billion on balance sheet and $60 billion off.
“We recognise that wealth management is an off balance sheet, fee income business, and it is the future,” said CEO of Proven Management Limited, the management company of Proven Investments. “We think that FGFS has given us a great platform to continue to build out. They already have a great off balance sheet portfolio and we are very excited about the opportunities to work with their clients and working with their talented team — GraceKennedy has a reputation for having top quality staff.”
For GraceKennedy, the decision to divest FGFS was guided by the conglomerate’s goal of reallocating capital in line with its long-term strategic objectives to build cash reserves that will drive growth plans, including acquisitions, according to the group’s CEO, Don Wehby .
“Growth plans include further investment to expand First Global Bank in Jamaica and the group’s financial services regionally,” he said.
FGFS president, Steven Whittingham, will remain in a senior position within the GraceKennedy Group, while Proven will change the name of FGFS after the deal gets regulatory approval and the sale is completed.
A two-week-long rights issue, which is offering one ordinary share at 14 US cents a stock unit for every four that are already in issue, opens next Wednesday, which should raise US$10.3 million to fund the acquisition while providing a decent discount for stockholders.
The company’s share price closed at 16 US cents yesterday, having fallen from the 19 US cents-a-share high in mid-April.
Proven Investments’ capital base will be used to finance the rest. At the end of December 2013, it stood at US$32.2 million ($3.5 billion).
The investment house doesn’t plan to limit itself to buying financial services companies.
It already is on a drive to grab up US$20 million worth of property through its real estate investment trust, Proven REIT, and has set its sights on investments in the energy, tourism and health sectors in the Caribbean.
The company failed to get a piece of the 360-megawatt (MW) generating plant that is to be built in Jamaica, given that the consortium it was a part of didn’t win the bid, but Proven is now seeking a stake in one of the three renewable energy companies that has been approved to build out some 78 MW in Jamaica by 2015.
“We are in negotiations with individuals that have been successful on the renewable side,” said Williams. “We hope that we will be able to get into energy.”
Similarly, after discussions with Chukka Caribbean did not result in deal, Proven has started to look at other attractions, while talks with entities looking to provide health services to the Baby Boomer market in the US have commenced.
Williams says that Proven’s strategic objective is aimed at taking position in private deals as well as tradable securities wherever the investment opportunities present themselves.
Proven has raised over US$130 million in equity and debt funding since inception and had total assets of US$146 million at the end of December 2013.