Richard Byles: the savvy deal maker
Business Leader: Executive Steward NOMINEE #10
Today the Jamaica Observer publishes the 10th of 12 stories on the nominees for this year's Business Leader Award being held under the theme “Business Leader: Executive Steward”. The nominees are among the top CEOs in Jamaica.
The past 25 years have been a mixed bag for our financial sector.
Pull back the curtain on the two-and-a-half decades and it yields the indelible scars of watershed moments.
Sagicor Group Jamaica is the end-product of the tectonic forces that shaped the decades and beyond. It is the brand that emerged once the dust settled on the multiplicity of mergers, buyouts, partnerships, takeovers and asset disposals that permanently remodelled the local economy.
Richard Byles is the human equivalent of Sagicor. From the mid-1980s this corporate leader has been in the driver's seat of one company or the other. He is the one who steered the institutions under his custody clear of the pitfalls that imperilled the fortunes of others that lacked his steady hands at their wheels.
It is hardly surprising that the Barbadian investors, in search of a CEO to run Life of Jamaica (LOJ) would have turned to Byles, they having taken a 49 per cent stake and effective control of the local insurer in 2003.
Byles, as it turned out, was the astute executive who had played a major role in preserving many of the institutions that were later merged with LOJ and which enhanced its appeal to the shareholders of Sagicor Financial Corporation of Barbados.
In February 2004 the Jamaican was named president and CEO of Life of Jamaica; the insurer was later renamed Sagicor to reflect its corporate lineage.
The CEO inherited a company that had market value of $9.9 billion and which posted net profit of $1.2 billion for the full year preceding his appointment.
He spent 13 years at the helm, retiring in April this year. Under his stewardship, Sagicor, a funny-sounding moniker to the average Jamaican ear, nevertheless became a household brand throughout the breadth and depth of the country.
The raw statistics and the management achievements that they undergird are suggestive of why the name Sagicor is now among the island's most identifiable corporate brands.
The breathtaking data include the $150 billion in market capitalisation that Byles handed over to his successor, Christopher Zacca, in April. This meant that the company doubled its original market value on average each of the 13 years that Byles was its CEO.
Of course, the market value would have hewed closely to the bottom line performance that the enterprise churned out annually, and this too represented a mind boggling feat.
Byles, a man who is not given to singing his own praise, was hard-pressed to point to this achievement.
“Driving this stock market performance is 17 years of increased profit every year,” he remarks. “I am not sure if any other listed company has done better.”
Even if others had equalled or exceeded this performance, it would hardly have diminished the impressive achievement.
At balance sheet date, Sagicor held an asset portfolio worth $360 billion and had off-balance sheet custody of another $260 billion in pensioners' savings. In 2016, stockholders enjoyed a 22 per cent return on their average equity when the enterprise posted net income of $11.2 billion. The profit represented an eleven-fold increase over the net income generated in 2003, and the return on equity was multiples of what investors could have secured if they had opted to park their cash in fixed deposit instruments.
“That puts Sagicor in a unique and special place in the Jamaican economy and business community,” Byles stresses. “It makes us the largest owner of equities on the JSE (Jamaica Stock Exchange) and the largest owner of commercial real estate in Jamaica. With 2,200 hotel rooms in Jamaica and Florida Sagicor is a major player in the tourism business and one of Jamaica's biggest US dollar earners. In our financial companies and hotels we employ more than 5,200 persons.”
If the former CEO appears to be framing his narrative in the present tense, it is probably in part because he is still profoundly invested in the organisation — having been named non-executive chairman after his retirement as CEO. At Sagicor there is strict adherence to age-restricted rules laid out in its articles of incorporation and Byles, despite his youthful bearing, had crossed that threshold.
R Danny Williams, the entrepreneur who co-founded LOJ in the 1970s, surrendered the chairmanship to Byles.
The new chairman insists, both privately and within the public square, that it is Zacca who is now in charge of the organisation and that his new role will be restricted to its traditional responsibility of boardroom oversight.
This separation of authority has been Byles' constant refrain, so much so that he was reluctant to pose for the usual Business Leader photo ops with the management team and staff of the institution for fear of impinging on executive prerogative.
Nevertheless, what is undisputed is not just the scale of transformation that the organisation underwent during his watch, but the manner in which he personally became its public face in his 13 years there.
Still, any review of Byles' tenure and achievements at Sagicor would be grossly incomplete without a prior nod to his role and ascendancy within Maurice Facey's Pan Jamaican orbit. That engagement immediately preceded and in fact paved the inevitable pathway to the Sagicor appointment.
First, his entry point to Facey's family-controlled business came in 1987, six years into the operation of Pan Caribbean Merchant Bank when the family patriarch appointed him its managing director.
Within three years, Facey had apparently seen enough of the banker's leadership acumen and promoted him several rungs up the ladder to the dual role of CEO of Pan Jamaican Investments, the holding company for the family businesses, and president of one of its major subsidiaries, First Life insurance company.
In a retrospective opinion of the decision, Maurice's son Stephen Facey, who now heads Pan Jam (Maurice passed away in 2014), said that Byles' appointment helped to save the family enterprise.
“Richard has been the key to our success,” Stephen asserted during a 2009 interview when his family was nominated for the Business Leader Award under the theme, 'Business Leader: Families in Business'. “He successfully steered the companies through all the changes and challenging period that we faced,” he added in his effusively generous scorecard on Byles' stewardship. “He got us to focus on the things we were good at and divest ourselves of the things we were not successful at.”
That dual track of divestment and investment saw the family business shedding its interest in agriculture, agro-processing, and tourism, while deepening its footprints in the financial sector.
The late 1990s structuring of a 50/50 partnership with Pan Jam and Seprod Group for the $123-million buyout of Eagle Unit Trust from FINSAC was one of the deals that gained public attention. Another was the 1993 decision to sell just under 30 per cent of the shares in First Life by way of listing on the Jamaica Stock Exchange.
Pan Caribbean Merchant Bank, which was led at the time by Donovan Perkins, was the subsidiary that was let loose on the market during the period. The merchant bank went on an expansion binge — all aimed at gaining critical mass. It acquired Lets Investments, giving it a greater stake in western Jamaica where the financial advisory outfit had a sizeable presence. Trafalgar Development Bank and Knutsford Capital Merchant Bank followed.
Yet it was the later acquisition of Sigma Manufacturers Merchant Bank, an entity that itself was the product of an earlier merger, that sent the clearest signal of the accelerating consolidation within the financial sector, and that the Pan Jam brand was intending to be the last one standing.
As it turned out, these acquisitions were only harbingers of the really far-reaching moves that Byles was yet to unveil to the public.
By the early 2000s persistent rumours began to circulate within the corridors of corporate Jamaica that something really big was about to happen in the financial sector. According to the whisperers, Byles and his team from First Life had initiated talks with the giant in the life insurance industry — Life of Jamaica. Even so, when the formal announcement finally came in 2003 it sent seismic shock waves across the corporate world.
Under the arrangement, First Life's insurance portfolio and Pan Jam's 60 per cent interest in Pan Caribbean Merchant Bank were exchanged for shares in LOJ — giving Pan Jam a 24 per cent stake in the enlarged entity.
Before the incredulous public could fully digest the news of this mega-deal, Dodridge Mille, the CEO of Sagicor Financial Corporation of Barbados — a man as unfamiliar to Jamaicans as the company he represented — appeared on the scene with yet another stunning announcement.
The company out of Barbados — a metaphor for the Lilliputian in the minds of many Jamaicans — had taken a 49 per cent chunk and importantly effective control of the iconic Jamaican insurance company.
With this jaw-dropping declaration, the Bajans brought the curtain down on the most prolific period of mergers and acquisitions in the country's history.
Here is how Byles encapsulates the early years that led to that unforgettable moment. “My 13 years at Pan Jam were marked by efforts to re-shape the group from an amorphous conglomerate with a number of loss-making enterprises, into a tighter more competitive group where every unit contributed positively to the bottom line. It therefore involved closing and selling enterprises mostly, but also deepening ownership in the financial services area.”
The deal-making and financial restructuring skills that the new president and CEO brought to the leadership position of the insurance-led behemoth were well documented and known to all stakeholders.
But by his own acknowledgement, Byles now had to quickly climb the learning curve for people management skills — a quality that would be critical to building esprit de corps within the multifaceted organisation.
“It never occurred to me that I would ever be CEO of such a large enterprise,” he confesses. “I had to quickly come up the curve on managing people. LOJ was a university in people — many, many more than at Pan Jam, including high-performing life advisors. I had to calm anxieties, win confidences and inspire them to achieve even more.”
And who could fault him for this bit of self-awareness of his industrial relations deficit?
This sprawling conglomeration of commercial banking service, a whole range of pension fund management outfits, a comprehensive portfolio of insurance services, hotel operation locally and overseas, real estate development companies, captives management and securities trading would be intimidating to even the most deft and experienced hands at the trade.
It helped however, that Byles' experience in running a large family-controlled enterprise as a non-family member would have honed his skill-set as a team player, a feature that he put to great effect at this financial-led group.
“I work through teams,” he declares. “I search for people who are good at their specialisation, know more than me and allow them to deliver on stretch targets.”
On display was a management style driven by a blend of the practical and philosophical.
“The best teams are comprised of diverse persons, they produce extraordinary results; teams of similar persons produce more of the same,” he notes. “The leadership team I had the privilege to lead at Sagicor comprised all types of personalities, but all were inspired and driven to produce better results each year. All the major decisions made over the years were done after full consultation with the leadership team; they are as much a part of the success of Sagicor as I am.”
Three major transactions that were consummated under his guidance are illustrative of the deal-making skills that Byles burnished during his acquisitive years at the Pan Jam establishment, experiences that he obviously took with him to Sagicor.
Here, in his own words, is how the Blue Cross deal unfolded:
“In 2008 we heard that Blue Cross, our major competitor in health insurance, wanted to sell their portfolio in Jamaica and that they were talking to a particular financial group. We immediately did our assessment and briefed our chairman, Danny Williams. We liked what we saw and Danny and I went straight to the Blue Cross persons, passing the competitors in the parking lot as they exited their meeting. Within a few negotiating sessions we won the deal and acquired the portfolio.”
Under this man's leadership, institutional nimbleness and teamwork, rather than being at cross-purpose with each other, became a convergent force for shared objectives at Sagicor.
But there is also an interesting subtext to the efficiency and efficacy with which the CEO and his team were able to close big, complex transactions: the wide berth that they were afforded reflected the unimpeachable confidence of Miller in Barbados, and closer home, Williams, in their collective judgement.
Byles acknowledges as much in our interview.
“I had a special relationship with Danny Williams when he was chairman,” he says. “I am profoundly impacted by him as a corporate leader who founded LOJ, as a Jamaican who has given so much public and charitable service and as a man of utter integrity, openness and optimism. Similarly I have a special relationship with Dodridge Miller, the CEO of SFC (Sagicor Financial Corporation) who has always demonstrated confidence in my leadership in Jamaica, even when it wasn't in the SFC 'playbook' — going into banking and the hotel business. I also benefit from an excellent relationship with Stephen Facey, who I have worked alongside for nearly 27 years and who represents Pan Jam, one of our largest shareholders.”
The initial hesitancy at the ownership level to commit capital behind a strategy of radical income diversification eventually gave way to its full-fledge endorsement once Byles and his team began presenting case after case for investment.
Another example of this corporate dynamic at work was the opportunistic reach for RBC's Jamaican operation.
Here is Byles' explanation of how the transaction came together:
“In 2014 we heard that RBC wanted to sell out their Jamaican banking operations and were in discussions with a rival group. Donovan Perkins and I did a quick analysis of the info we had at hand, got the blessing of our board and flew to Trinidad to make our case, meeting our competitors heading in the same direction. We were short-listed and eventually won the bid.”
At the risk of superfluity, the move into tourism can be cited as providing yet another window into how this bullish CEO and his team succeeded in recalibrating the boardroom vision to closer align with the opportunities that the executives were seeing emerging in their market.
So while Sagicor had a long-standing foothold in tourism through its ownership of the Sandals-managed Dunn's River hotel property near Ocho Rios, this was essentially a landlord/tenant arrangement. When Sandals gave up the management in 2010, Byles saw an opportunity to change that relationship going forward and reached for it.
“We decided to find a management company, rebrand it and become hoteliers in the true sense,” he says. “Rohan Miller, the executive vice-president of investments at Sagicor, led this charge and after 18 months Jewel Dunn's River made a profit.”
He reckons that the early success of the group's foray in tourism coupled with management's confidence that this venture represented an ideal match for Jamaica and the insurer's long-term pension fund, emboldened the organisation to deepen its roots in the industry.
“We acquired three other hotels in Jamaica in quick order thereafter,” he says. “Today we own more than 1,500 rooms in Jamaica and 742 in Orlando, Florida and employ 2,536 persons.”
The Jamaican hotels are some of the most easily recognisable in the industry. They are:
• Jewel Paradise Cove
• Jewel Runaway Bay
• Hilton Montego Bay
• Jewel Grande — the latest addition and former Palmyra in Montego Bay.
For three years ending 2016, Byles was able to volunteer the sense of discipline and rigour he had developed in managing successful businesses to public service — co-chairing the private/public sector committee that was established to monitor and report on Government's progress in meeting key economic targets.
“I felt that I was doing something meaningful for the country,” he says, reflecting on his stewardship. “EPOC had no legal/parliamentary sanction so the challenge was how to make sure our views were taken seriously by the authorities and how to get Jamaicans to understand the aim and expectations of the programme.”
For the past 12 years he has also served as chairman of Red Stripe.
But as he settles into his role of chairman of the company for which he had executive leadership for 13 years, this visionary has his sights on a few important goals.
Here is how he lays it out:
“I believe Sagicor is a good company. I mean, our customers are pretty pleased with our products and service delivery, our team is motivated and engaged, our shareholders have received a good return on their investment and our corporate social programme is meaningful and impactful. I would like to change that performance and reputation from 'good' to 'great'.
“I have therefore put before the board a matrix of deliverables to do with all our stakeholders that we shall stretch to achieve and shall track at each board meeting and certainly at each AGM. My aspiration as chairman of Sagicor is to make it a 'great company' and I am certain Chris Zacca and the team will deliver on it.”
— Moses Jackson is the founder of the Business Leader Award programme and chairman of the Award Selection Committee. He may be reached at email@example.com
— Freelance journalist Nazma Muller contributed to this story