CIBC wants Republic Bank; government wants to keep it local

The Government of Trinidad and Tobago and the country's Central Bank are trying to divest CL Financial's 55 per cent stake in Republic Bank and possibly keep the country's largest commercial bank in local hands.

The Canadian chartered bank CIBC is seeking to buy the shares and take control of the bank following a failed bid a few years ago to move into Republic.

Central bank Governor Ewart Williams told reporters, "No matter who gets the shares, the resources will return to the Government."

CIBC is seeking a meeting with Government to discuss the possibility of buying Republic's shares. The current estimated value is TT$8 billion with its market shares quoted at TT$86 a share.

Republic Bank posted annual profits for the 2008 fiscal year of $1.2 billion and had total assets of $41.56 billion at the end of the year.

CIBC has a long presence in the Caribbean, opening its first branch there in 1920. Most recently, it paid about $1.3 billion (Canadian) to acquire a 91.49 per cent stake in FirstCaribbean Bank between 2006 and 2007. Executives have since hinted that CIBC would consider acquisitions to bolster that footprint.

But CIBC Rob McLeod told the Toronto Star newspaper, ""We have no comment on these reports.

Last year, another Canadian Bank, Royal bank, bought back Royal Bank in Trinidad and Tobago for Cdn$2.2 billion (TT 15 billion approx.) to consolidate its strong poistion in the whole Caribbean.

Shareholders will receive about $6.33 per share, payable in a combination of 60 per cent cash and 40 per cent Royal Bank of Canada common shares. The bank's headquarters will be in Port of Spain.

The Republic-CIBC deal would not be that straightforward if it happens at all. The Trinidad and Tobago government is determined to protect the bank and keep it at home. Republic's business is predominantly domestic.

A report prepared by the Bank of Montreal earlier this month suggested that the marriage between CIBC and Republic Bank is an ideal one for both bank's shareholders. It based this analysis on the fact that CIBC has wide ranging investments throughout the region while Republic is the strongest local bank. A combined CIBC-Republic would give the institution significant strength in Trinidad and Tobago and the Caribbean.

However, there is one concern for CIBC that could complicate any possible transaction. The report suggests that the RBTT shares are overvalued and CIBC would not enter into a business arrangement unless it pays a fire sale price. Both Republic and the T&T Government are likely to resist that. But CIBC is banking on the global economic crisis to get it negotiating clout.