FINANCE Minister Dr Omar Davies yesterday formally announced the sale of government’s 75 per cent interest in National Commercial Bank (NCB) for $6.034 billion, to Jamaican-born, Canadian billionaire, Michael Lee Chin.

Lee Chin, who acquired the bank through his Toronto-based funds management company, AIC Funds, will, by March 18, pay the government the US dollar equivalent of J$2.65 billion (US$56 million at current exchange rate). The balance of J$3.384 billion will be paid over nine years, via eight annual instalments, with the outstanding balance attracting prevailing treasury bill rates.

“This transaction represents the most significant milestone in the programme of financial sector rehabilitation pursued by this government since 1997,” said Davies, as he addressed a battery of high-powered financial sector officials and members of Chin’s large family.

“On completion, the government’s dominant ownership role in the banking sector will be a thing of the past,” added Davies.

Lee Chin, who owns 90 per cent of AIC Funds Management — which itself manages a Can$15-billion portfolio, representing the savings of one million Canadians — vowed yesterday to throw the weight of his institution’s capital and expertise behind NCB.

“I pledge that AIC will put its weight behind NCB to make sure that it becomes the pre-eminent financial institution in the Caribbean,” said Lee Chin, as he unveiled his vision of transforming the bank into a financially-secure, customer-friendly institution.

The purchase price at $4.08 per stock values NCB at $8.04 billion, just over 80 per cent of its current market capitalisation. Yesterday, the stock traded firm at $5.

Importantly, however, the price is almost 90 per cent of the $9-billion net book value reported by the bank at the end of its last financial year, September 30, 2001 — making for a modest discount of 10 per cent.

On the face of it, therefore, the government secured a far better deal than what was the outcome of the negotiations for the sale over a year ago, of Union Bank to the Royal Bank of Trinidad and Tobago. The price paid for that institution represented a steep discount on its net book value, which led to criticisms that it was a virtual give-away.

But Lee Chin, too, appeared to have negotiated tough with the government — having secured a nine-year period in which to make full payment — an obligation, which, at current levels of (pre-exceptional item) profitability can be easily satisfied from the internal resources of the bank.

Lee Chin said yesterday that he was still undecided whether to seek a waiver from the Jamaica Stock Exchange, whose takeover rules would make it mandatory for AIC to make a bid for all the shares held by the minority shareholders. Under the JSE rules, the offer price to those shareholders would be $4.08 — the same price at which the shares were acquired from the government — making it an unattractive deal for minority shareholders, given yesterday’s closing price of $5.

It appears likely, however, that Lee Chin will avoid having to make the general buy-out offer, by arguing, again under the JSE rules, that the bank is being bought to rehabilitate it and to secure its future.

He was clear, though, that he had no intention of diluting his own stake in NCB.

“I do not intend to sell any of the shares,” he said. “The (stock) market is there for anybody who wants to participate in NCB.”

Lee Chin, who is from a family of nine, and whose brothers include Wayne Chen, the CEO of SuperPlus Food Stores, and the 1999 Business Observer Business Leader, emigrated to Canada in the 1960s and studied engineering. He formed AIC in the 1980s with very little capital but a lot of what he called “creativity”.

He said his management strategy in Jamaica would mimic his personal business ethos that had made him such a success in Canada. He would strive, he argued, to improve on the current structure at NCB, and to engender an esprit de corps among the management and staff.

“We will work as diligently as possible to make sure the staff is secure, and confident about the future and provide a fertile environment for their development,” he declared. “We will work with passion. We want 80 per cent of the market… We will build a first-class institution that will add maximum value for the shareholders.”

Lee Chin declined to comment on the future board composition for NCB.

Significantly though, the current deputy chairman, Dunbar McFarlane, in a brief note at the press conference, congratulated Lee Chin.

NCB’s chairman for five years, Oliver Clarke, resigned weeks ago, and was replaced by Tony Hilton.

The sale of the bank marks the beginning of the end for Finsac, the vehicle that the state created in 1997 to prevent the collapse of financial institutions from decimating the savings of depositors, pensioners, and policyholders. Those financial institutions that fell into public hands have now all, in some form or another, been returned to private hands.