Sagicor Financial Corporation (SFC) and Scotia Life Trinidad and Tobago have mutually agreed to discontinue their 20-year distribution deal, which expired on June 30.

The original deal brokered by SCF in November 2018 would have resulted in the financial holding company acquiring the Jamaican and Trinidad insurance operations of Scotiabank.

Both deals involved SFC, the parent of local conglomerate Sagicor Group Jamaica, underwriting insurance product and solutions, which would be offered to Scotiabank customers in each country for an agreed period of 20 years.

The Jamaican deal was mutually called off in November 2019 with SFC indicating in their 2019 annual report that there was no guarantee that the Trinidad deal would have been completed. SFC vice-president of Investor Relations, Samantha Cheung, sought to explain the reasons for the deal being called off.

In an e-mail to the Jamaica Observer‘s Sunday Finance, Cheung explained that “there were some regulatory hurdles that questioned the economic return of the transaction”. Highlighting the fact that SFC remains focused on opportunities, which may arise in the region, Cheung emphasised that, “Sagicor is always looking to continue growth across its business in the Caribbean markets where Sagicor is a leader and the population is underinsured.”

Sunday Finance sought answers from Scotia Life Trinidad about the termination of the deal. In its response, Scotiabank stated, “when the transaction was announced back in November 2018, the consummation of the transaction was subject to both parties agreeing on all the constituent parts of the deal, as well as securing regulatory approval. Both parties negotiated in good faith, however, there were a number of conditions that were important to Scotiabank as well as to Sagicor that we were unable to come to a final agreement on.”

 

SFC FORGES AHEAD

Despite this setback, SFC has moved onto other endeavours, which may work out in the favour of shareholders. One of these ventures is the initiation of a share buy-back of up to three million common (ordinary) shares on the open market of the Trinidad and Tobago Stock Exchange.

The buy-back programme, which runs June 22, 2020 to June 21, 2021, allows for the company to purchase up to 2.01 per cent of its issued share capital. Based on regulatory filings, SFC has already bought back 966,000 shares, valued at approximately US $5.17 million as of July 3.

A share buy-back is a process whereby a company repurchases some of its existing ordinary shares from the market where there is a perception that the company’s stock price is trading below its intrinsic value. The result of this process is fewer shares being in circulation, which increases the stake of remaining owners, who own the stock.

Kingston Properties and the Eppley Caribbean Property Fund are the most recent companies to engage in share buy-backs on the Jamaica Stock Exchange. In outlining the rationale for the share buy-back, SFC pointed out that the underlying value of the company may not be accurately reflected by the market’s pricing of the stock.

Through the share buy-back, SFC will be able to realise a greater opportunity to reduce its existing shares and provide liquidity for shareholders, who want to dispose of their shares. SFC closed at CAD $5.65 on Thursday with Yahoo Finance calculating a book value of CAD $7.08 from the most recent quarter.

The company recently engaged in a major deal in which it purchased one and a half million shares in Playa Hotels and Resorts NV (Playa) through its wholly owned subsidiary, Sagicor Financial Corporation. In a filing with the United States Securities and Exchange Commission a week ago, it was revealed that Sagicor had bought US$6 million worth of shares in Playa, which increased their holdings to 21.5 million shares.

This was the second major deal by Sagicor involving Playa after the June 2018 deal which saw two major Sagicor parties acquire 20 million shares in Playa along with US $100 million in cash in exchange for the Hilton Rose Hall, three Jewel resorts in Jamaica and several other assets arising from the transaction.

http://www.jamaicaobserver.com/sunday-finance/sagicor-financial-corporation-and-scotia-life-tt-distribution-deal-discontinued_198282