March 28, 2023

Bank of Nova Scotia’s sell-off of $123M in Caribbean assets faces increased scutiny

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From VI Free Press

TORONTO — Bank of Nova Scotia’s plan to sell some of its Caribbean assets is facing scrutiny from a regional watchdog that has flagged what it says are the deal’s “anti-competitive effects.”

Scotiabank announced late last November that it had struck a deal to sell banking operations in nine “non-core” Caribbean markets to Trinidad and Tobago-based Republic Financial Holdings Ltd.

The Canadian lender also said that it was selling insurance subsidiaries in Jamaica and Trinidad and Tobago to Barbados-headquartered Sagicor Financial Corporation Ltd.

In early December, the competition commission of the Caribbean Community (or CARICOM) said it had “taken note” of Scotiabank’s announcement and “further noted the concerns of bank customers and governments across the region regarding the proposed acquisition of Scotiabank by Republic Financial.”

More recently, the Suriname-based commission said in an update that it had completed a preliminary review.

“Such assessment indicates that the proposed transaction or parts thereof could possibly have anticompetitive effects in at least three Member States in the Community,” a statement dated March 27 said. It did not say which of the 15 full members of the CARICOM bloc could be affected, or give further details about any alleged “effects.”

However, the CARICOM Competition Commission also said it would reach out to national and sector regulators in the affected areas, “for the conduct of preliminary examinations of proposed transaction” between the businesses.

“In furtherance of its commitment to fair and transparent processes for both the business community and consumers, the Commission will continue to monitor this activity in the Community and will inform as appropriate on further progress of this matter in affected Member States,” the statement added.

Scotiabank’s Caribbean banking asset sale — involving Anguilla, Antigua, Dominica, Grenada, Guyana, St. Kitts & Nevis, St. Lucia, St. Maarten, St. Vincent and the Grenadines — forms part of a broader campaign by the bank to focus its energies on its core markets.

In February, for instance, the lender announced it would sell banking and insurance businesses in El Salvador, a move it said was “driven by the bank’s strategy to focus on key markets which can generate greater scale for Scotiabank.”

The bank’s plans have been widely reported on in the Caribbean.

CARICOM’s competition commission, which was created by treaty to encourage economic development among participating nations, says on its website that it has certain powers, including the ability to impose fines and to “direct the enterprise to cease and desist from anti-competitive business conduct.”

In response to questions from the Financial Post, Scotiabank said it “acknowledges the CARICOM Competition Commission’s contribution to the regulatory approval process, and continues working closely with Republic and all applicable regulatory authorities to provide all needed information related to this transaction.”

The bank said previously that the transactions announced in November would not be “financially material,” but that they would increase a measure of capital strength by around 10 basis points upon closing.

Republic Financial previously said in a release that the purchase price on the Caribbean bank assets was about $123 million.

The purchase price on Scotiabank’s insurance operations in Jamaica and Trinidad is around $240 million, according to a November investor presentation. It was also subject to the closing of an acquisition of Sagicor by Toronto-based special purpose acquisition company Alignvest Acquisition II Corp.

“Until such approvals are obtained and conditions are met, and the transactions close, all Scotiabank operations in these countries will continue as usual,” the bank said in November.

Alignvest announced on March 1 (before the Caribbean competition commission weighed in) that it and Sagicor were postponing shareholder meetings to allow both companies more time to market the deal, as well as to “afford time for investors and shareholders to understand the publicly available information.”

Scotiabank is set to hold its annual meeting of shareholders on Tuesday in Toronto.

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