PROVEN Group Limited will be acquiring the remaining 25 per cent stake in Boslil Bank Limited from former Chief Executive Officer (CEO) Ryan Devaux in a US$10.21-million ($1.58-billion) deal.
The move follows approval from the Financial Service Authority of St Lucia on August 31 and approval by Proven Group's board on October 6. The transaction involves Proven acquiring Devaux's 13,803 ordinary shares and making Boslil a wholly owned subsidiary of the Proven Group by virtue of owning Boslil's 75,213 issued ordinary shares. Boslil Bank is a Class A licensed bank in St Lucia which provides international banking services.
Devaux will in turn be issued and allotted 42,300,000 new ordinary shares of Proven Group from the authorised share capital of the company. The price used to value the shares in the transaction is US$0.2413 which is the peak intra-day trading price of Proven Group's United States Dollars (USD) shares on the Jamaica Stock Exchange (JSE). An application to do a supplemental listing of the newly issued shares will be made to the JSE. Proven's stock prices are down 8 per cent year to date to US$0.19 and $30.56.
"Given the acquisition of Cayman, we are moving towards establishing a consolidated banking entity. It is largely as a result of CIMA's requirement from the purchase of Proven Bank [Cayman]. They gave us a year to put that in place. So, that's what we're doing. We're moving Boslil under Proven Bank [Cayman] and we're going to rename it Proven Bank (St Lucia) and we'll have one CEO,which is Benjamin Freeman, who is based in Cayman," said president and CEO of Proven Management Limited (PML) Christopher Williams in a call with the Jamaica Observer earlier this week. PML manages the operations and investment activities of Proven Group Limited.
Proven's 2022 annual report noted that the group was restructured to include a Cayman bank holding company known as Proven Bank Holdings Limited (PBH). It stated that as part of the streamlining efforts, Proven Bank (Cayman) (formerly Fidelity Bank [Cayman]) will acquire Boslil and that the consolidated entity will become a direct subsidiary of PBH. PBH acquired Fidelity Bank (Cayman) on February 1 for US$32.12 million for a discount to its net asset value of US$36.68 million. The name change to Proven Bank (Cayman) occurred on August 1 while Boslil's name change is still pending approval from St Lucian regulators. Proven Bank falls under the banking and wealth pillar of Proven Group led by Johann Heaven.
Proven Group's current structure has PBH, Proven Investment Holdings Limited owning its other holdings and Proven Holding Limited which owns 20.01 per cent of JMMB Group Limited's issued ordinary share capital.
The deal would make Devaux the single largest individual shareholder in Proven Group just above Barita Investments Limited's 32.54 million ordinary shares. It would also push Proven Group's issued share count from 759.43 million ordinary shares to 801.73 million ordinary shares. This in turn would dilute existing shareholders, such as Williams, whose 1.84 per cent stake would become 1.74 per cent.
When asked why Proven didn't offer cash as part of the deal, Williams responded, "Well, that's a negotiation and that's a private matter. There are several variables in a negotiation."
Proven Group (formerly Proven Investments Limited) acquired 100 per cent of Boslil Bank (formerly The Bank of St Lucia International Limited) in March 2017 for US$12.6 million in what was described a bargain purchase to net assets of US$20.63 million. It transferred 17.18 per cent of Boslil Bank on the same day of the purchase to Devaux which was accounted for as a share based payment valued at US$3.24 million. Devaux exercised his option to acquire an additional 7.82 per cent of Boslil Bank for an exercise price of US$1.28 million in March 2018 which was done through an issuance of new shares in Boslil. Proven and Devaux injected US$2 million in fresh equity capital into Boslil in March 2020 against a potential regulatory breach due to expected credit losses from the novel coronavirus pandemic.
Boslil has paid out US$16.57 million in dividends since being acquired by Proven with the investment holding company collecting approximately US$12.43 million since March 2017. Devaux has in turn received US$4.14 million in dividends during that period as well. Boslil's website states that Devaux is now the former CEO of the bank but remains a director on the board. He's been with the bank since 2005 and has led it up until recently. Freeman is listed as the CEO while Fiona Quinn is listed as the president and chief operating officer.
Boslil profit base had expanded from US$2.44 million at the end of 2016 to a record US$6.26 million in March 2021. Boslil's net profit shrank to US$2.18 million in March 2022 despite revenue growing 19 per cent to US$8.57 million. Boslil's first quarter performance saw its net profit shrinking 76 per cent from US$1.1 million to US$0.26 million which was attributed to a decrease in securities trading income and a rise in IFRS (International Financial Reporting Standards) 9 FVTPL expenses from a less favourable trading environment. Boslil's asset base decreased on a sequential quarterly basis from US$357.86 million to US$338.7 million.
When the Caribbean Business Report inquired about the reduction in profitability and continued mark down in bond prices at the annual general meeting, Williams said, "the credit quality is what we watch. We don't watch the market prices because we're not trading. We track the credit rating of the issuers, and we haven't had any downgrade of significance for any issuers. It's great quality and mainly investment grade. We had an aggressive 2021 from securities trading performance and 2022 is down from that, but it is not because securities trading is our concern, but 2021 was an anomaly."
Proven Bank (Cayman) reported a US$1.81 million net loss on US$12.42 million of revenue for 2022 as the former owners were winding down operations in the Cayman Islands. Its asset base declined three per cent on a sequential quarterly basis to US$350.8 million as of June 30. Proven Bank is a Category 'A' Bank and has two branches in the Grand Cayman. It's one of the six retail banks in the Cayman Islands.
Due to the increase in the United States Federal Funds rate to 3-3.25 per cent on September 21, Proven Bank (Cayman) adjusted its prime rates on US$ and Cayman Islands (CI) dollar variable rate loans to 6.25 per cent as of September 23.
"We like the international banking space as it's not loan heavy, it's very treasury type and the clients are primarily international clients who do transactions online. International banking clients don't want excitement. They want a very stable bank and balance sheet. That's what we've been giving them in both Cayman and St Lucia," Williams closed.
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