Friday, June 15, 2007

CIBC's FirstCarribean May Buy RBTT Financial Holdings

Financial Post, Jonathan Ratner, 15 June 2007

CIBC's FirstCaribbean affiliate and Trinidad-based RBTT Financial Holdings Ltd. are apparently in the final stages of a merger agreement, according to a report from the LatinFinance news service.

Blackmont Capital analyst Brad Smith noted that while the rumour is nothing new, the LatinFinance report is strong enough to take a look at what the acquistion might mean for CIBC.

He thinks CIBC could make it happen, but it would cost roughly $2-billion. He also thinks it could be modestly accretive to the bank’s earnings to the tune of 25¢ per share in the first full 12 month period after any deal is completed. That’s assuming a 50-50 debt to equity funding split and savings of 20% of the target company costs, Mr. Smith said in a note to clients.

“A merger would bring some growth to an otherwise limited growth potential story,” he added.

However, he would like to see the benefits from FirstCaribbean materialize before another deal is done in the region.

FirstCaribbean was born in 2001 out of the merger of CIBC and Barclays’ Caribbean operations. CIBC acquired a 100% stake for $1.4-billion in February 2007.

Mr. Smith maintained his “hold” rating and $103 price target on CIBC shares.