Thursday 6th March, 2008

 

RBTT’s outrageous admission

 
 
 
 
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AFTER an interview with a top RBTT official last week, I asked for and received the directors’ circular pertaining to the sale of the bank to the Royal Bank of Canada.

The document, which is over 200 pages, should be on its way to the thousands of individuals, mutual funds, pension plans, credit unions and companies throughout the region who own shares of T&T’s largest bank.

For an interested RBTT shareholder like myself, the directors’ circular is a gold mine of always interesting and sometimes startling information. It seems to me that RBTT expects its shareholders to do what shareholders have traditionally done with shareholder documents—especially ones as voluminous as this one is—which is toss it to one side and never read it.

I urge all RBTT shareholders who are reading this—and who have an interest in their investment in the bank—to study that directors’ circular the way you used to “beat” your books in school.

It is important, I think, that the RBTT shareholders realise that we own the bank and that we should accept the responsibilities which come with ownership. The RBTT shareholders need to understand, as well, that whether the bank gets sold or not is entirely up to them and if they do not think the bank’s future would be best served by being owned by the Royal Bank of Canada, they have the right, collectively, to reject the Canadian offer. I think it is up to the Royal Bank of Canada and RBTT to convince the RBTT shareholders that the sale of the bank is the best option.

I remain unconvinced and feel that RBTT should have properly explored other options—such as disposing of its large stake in Guardian Holdings or selling 49 per cent of the bank—before opting to sell.

There was one aspect of the directors’ circular which I found particularly startling. On page 34, under the rubric “Investment Considerations,” there is a paragraph which reads: “Some of the directors and executive officers may have interests in the amalgamation that are different from the interests of RBTT shareholders. These interests may create potential conflicts of interest and cause some of these people to view the amalgamation differently than RBTT shareholders.”

That statement begs certain questions as it may cast serious aspersions on the ten RBTT directors and 16 executive officers identified on pages 42 and 43 of the circular:

• What does the statement mean?

• How could some directors and executive officers of RBTT have “interests that are different from the interests of RBTT shareholders” and how will they view the transaction differently?

• In what ways are the interests of these directors and executive officers different to the interests of the RBTT shareholders?

• Don’t RBTT directors and executive officers have a responsibility to ensure that they seek the best interest of the company’s owners at all times?

• Who are these directors and executive officers who “may have” different interests to the RBTT shareholders?

• Are the RBTT shareholders approving directors’ fees for people who “may have” different interests to the RBTT shareholders?

• Why are they still serving on the RBTT board or working for the bank if they “may have” different interests to the owners?

• Why have the RBTT chairman and CEO allowed directors and executive officers who “may have” different interests to the RBTT shareholders to continue to serve or be employed?

• Is it a coincidence that the statement about “different” interests is immediately followed by a sentence on the fact that some executive officers (four) have entered into employment agreements with RBC and some have not (12 of them)?

These are all questions which demand urgent answers. The future of the bank, and its proposed amalgamation with RBC, may depend on it, I feel.

20 things you need

to know about the

RBTT sale:

• Guardian Holdings and Richard Azar, who are described as principal shareholders, entered into a voting agreement on October 1 to support the sale of RBTT. This agreement took place on the same day that RBTT directors met and agreed to approve the terms of the RBC acquisition proposal; (pages 4 and 19)

For the deal to

be approved:

• A “yes” vote by not less than 75 per cent of the votes validly cast in person or by proxy at the RBTT meeting on March 26;

• If RBTT gets a better proposal for the bank and terminates its agreement with RBC, it must pay RBC the US dollar equivalent of $343.8 million. This is equal to 36 per cent of RBTT’s 2007 profit attributable to shareholders;

If RBTT shareholders approve the deal:

• RBTT shares will be delisted from the T&T, Barbados and Jamaica stock exchanges; (page 13)

• RBTT shareholders “are required” to surrender for cancellation their RBTT share certificates in order to receive the “consideration” from RBC; (page 11)

• This applies even if the RBTT shareholder votes against the transaction but it is approved;

• Credit Suisse valued the bank at between $32.77 and $42.13 per share. The RBTT directors agreed to accept $40 per share from the Royal Bank of Canada;

• RBTT shareholders have a right to file an action in the High Court to have a judge determine the fair value of RBTT shares;

• Each RBTT share will be exchanged for $24 in cash and RBC redeemable preferred shares worth about $16;

• These redeemable preferred shares have to be issued and then redeemed for RBC common shares, which can only be sold on the New York and Toronto stock exchanges.

• RBC “has committed” to the creation of a depository receipt structure which would allow the trading of RBC stock units on the local stock market. RBC’s commitment is “subject to a number of factors including market demand, regulatory approvals and tax considerations.” (page 30)

• If RBC’s average share price falls below US$48.98, RBTT shareholders will receive less than $16 in equivalent RBC shares; (page 26)

• RBC’s share price on Monday was US$48.75 and on Tuesday it was US$48.19—both below the US$48.98 floor of the collar price;

• RBC reported a 17 per cent decline in its first-quarter profits. The Canadian newspaper, the Globe and Mail, reported on Friday that RBC’s profits were hit by US$430 million in pre-tax writedowns related to, among other things, US subprime mortgages.

• When RBTT shareholders vote for the proposed sale, “they will not be able to determine the exact value of the RBC shares they will receive following the amalgamation.” (page 33)

• It is currently anticipated that RBTT shareholders will receive their “consideration” for selling their shares on or “shortly after” June 30. (page 22)

• The bank, formerly known as RBTT, will be 100 per cent owned RBC Holdings (T&T) Ltd. This holding company will be owned by a holding company based in Barbados. (page 23).

• RBTT shareholders who receive RBC shares will have to pay a 15 per cent Canadian withholding tax;

• Four executive officers of RBTT entered into employment agreements with RBC: Group CEO Suresh Sookoo; David Hackett, head of Barbados, Suriname and the Eastern Caribbean; Krishendath Maharaj, head of group technology and Calvin Bijou, head of group marketing.

• Several top RBTT executives were not offered employment contracts including Catherine Kumar, head of RBTT’s local bank, Merchant Bank head Lyndon Guiseppi, Nicole Richards, corporate secretary and Paul Charles, company spokesman.

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