FIMBank seeks approvals in promising LFC takeover bid

By David Lindsay

Malta-based First International Merchant Bank’s bid to become one of the world’s leading banks in offering trade finance by next year is unquestionably one of, if not the most exciting venture underway by any of the companies listed on the Malta Stock Exchange.
Speaking at a shareholders’ briefing this week, FIMBank officials gave a detailed breakdown of how the goal stands to be accomplished, explaining that the bank’s friendly takeover bid of London Forfaiting Company Ltd is progressing in line with projections.
As reported in this newspaper last Wednesday, FIMBank broke the news last week that it had placed an offer for London Forfaiting Company Ltd, the leading brand name in the business of trade finance.
The mood among FIMBank shareholders assembled at the information session was positive yet inquisitive, particularly so in light of the enormous potential for growth the prospective acquisition offer presents, coupled with further growth potential for FIMBank’s share price.
Indeed, if the deal goes through the potential is great and wide-ranging. The London Forfaiting Company is recognised as the market leader in forfaiting, with what is considered to be the industry’s best client base of exporters and importers.
LFC at present employs a multi-national workforce of 63 professionals and has marketing offices in eight countries – representing a well-oriented global network that FIMBank is looking to capitalise upon, as well as the LFC brand name which carries a certain amount of clout in international trade circles.
But while FIMBank is seeking entry into the major leagues of trade finance, it is, not by any stretch of the imagination, a stranger to the arena. In fact, FIMBank has always been active in trade finance, which has consistently been its core business. The bank has also had aspirations of becoming a player of global proportions and, even before the proposed takeover of LFC, had allocated funding to increase its capacity in this respect - funds that are now being used to finance the LFC deal.
If the bid is successful, FIMBank expects the takeover to have a positive impact on its profits, however with a bank official commenting this impact would not be felt in the first half year of merged operations, but that the bank could expect tangible results in the following six month period.
But, the deal has not yet been finalised and a handful of hurdles remain. First of all is the possibility that someone else might still better FIMBank’s initial offer. Secondly FIMBank is awaiting regulatory approval from the Malta Financial Services Authority but tentative indications are that this will be forthcoming.
The proposal also needs to be greeted by a 90 per cent approval from LFC shareholders so as to give FIMBank the ability to carry out what is called a ‘white wash’ exercise - effectively delisting the company from the London Stock Exchange. So far, a FIMBank official explained Monday. The bank has received approval from 40 per cent of LFC shareholders, which includes a 100 per cent agreement from LFC’s board. The 90 per cent approval has to be given within 60 days of the initial offer and FIMBank believes this approval will present itself.
Finally, FIMBank is awaiting the final results of a due diligence exercise being carried out by FIMBank’s financiers for the takeover – Bank of America NA London, which had, in what could be considered a big vote of confidence, given its initial approval to finance the deal within 72 hours.
While LFC is the closest a forfaiting company can get to being a household name, it is neither it a stranger to adversity. It had, in fact, run into troubled waters in 1997 during the emerging markets crisis of 1997 when the Asian, Brazilian and Russian markets it was involved in had crashed.
LFC, despite its problems in the past, still enjoys a very well established name in the market. All its debts have been repaid and FIMBank would start with a clean slate in this respect.
The company emerged from the turmoil with its forfaiting book in very good shape. LFC’s current running costs are over its profit levels, but FIMBank expects to bring operative costs down to a profitable level within three to four months after acquisition and by 2004 these would no longer be a drain on resources, but instead augment them.
On 30 September LFC announced it was looking for a suitable partner to support the growth of the company and has scaled back its business substantially over recent months to increase its value to a potential buyer.
FIMBank has offered LFC GBP30.9 million share capital at a premium of 119 per cent over a closing price of 13.5 pence per share on 27 September 2002.