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JAM | Mar 20, 2023

Cornerstone reorg likely to lead to new JSE listing

/ Our Today

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Parent company outlines details of its planned reorganization

Durrant Pate/ Contributor

Barita Investments, which have been one of the most profitable company on the local stock market during the pandemic, is to be delisted.

Having secured a non-objection from Jamaica’s Central Bank, Barita’s parent company, Cornerstone United Holdings Jamaica (CUHJL) has articulated details of its planned reorganization, which would see the investment company being delisted from the Jamaica Stock Exchange (JSE).

In a statement sent on the weekend, under the signature of Group Chief Legal Officer and Company Secretary, Malindo Wallace outlined the mechanics of the reorganization saying it will now move to implement the group reorganization, which will be undertaken as a court sanctioned scheme of reorganization. The reorganization will ensure that all regulated entities within the Group are held under one holding company to enable consolidated supervision under the Banking Services Act by the BOJ.

Malindo Wallace, group chief legal officer and company secretary at Cornerstone United Holdings Jamaica (CUHJL).

Under the proposed new structure, Cornerstone Trust & Merchant Bank Limited (CTMB), Barita and its subsidiary, Barita Unit Trusts Management Company Limited (BUTMC) will be held under the financial holding company (FHC), which will see a new company being formed for this purpose. The restructuring is expected to result in Cornerstone Financial Holdings Limited (CFHL), the mirror company to CUHJL, assuming its assets and liabilities.

Transfer of shares

In addition, the shares held by CUHJL in CTMB and Cornerstone USA being transferred to CFHL.  According to the statement, “the amalgamation of CUHJL and CFHL will effectively result in the implementation of the ‘mirror principle’, which has underpinned the operations of both Cornerstone entities since CFHL’s incorporation. The amalgamation of CUHJL and CFHL will see existing shareholders who currently own an equal number of shares in each of the Cornerstone entities owning one set of shares in the combined entity of CFHL, post amalgamation.”

As such, a newly formed FHC will be created as a subsidiary of CFHL. The FHC, post incorporation, will issue shares to CFHL in exchange for the transfer by CFHL to the FHC of shares it owns in Barita and CTMB. The FHC will thereafter become the direct parent of Barita and CTMB.

Kingston/Saint Andrew, Jamaica – February 05 2019: The Jamaica Stock Exchange (JSE), the principal stock exchange of Jamaica, located on Harbour Street in Kingston, Jamaica

The statement explained that, “the Cornerstone shareholders in CFHL will continue to hold their shares in CFHL in the same proportion as they did prior to the implementation of the Scheme. CFHL will become the ultimate holding company for the Group. As a pre-requisite of the process, an application will be made to the Supreme Court for the convening of meetings by the Group companies that will be reorganized to allow the shareholders to consider and vote on the Scheme.”

Delisting Barita

Subject to the granting of all necessary approvals, it is intended that Barita, which is currently the publicly listed company within the Group, would be delisted from the JSE and that the FHC will be listed in its place. The effect, as was the case when other financial groups undertook their own restructuring under the BSA, is that the shareholders of Barita, at the relevant point in time, will see their shareholding move from Barita to the FHC.

Further details on this process will be provided subsequently and prior to the implementation of the Scheme.  The statement notes that the Boards of Directors of the Cornerstone Group and its management team are “excited about the prospects associated with the reorganization of the Group and its attendant benefits. Central to the objectives of the Group throughout this process are the synergies to be unlocked through closer integration of the operating entities, which we believe will redound to the benefit of our customers, shareholders and other stakeholders.”

Paul Simpson, founder of regional investment house Cornerstone.

The Group expects to further deepen and strengthen its focused efforts around risk management, governance and compliance in this next phase of its evolution.

The board and management “believe the formation and eventual listing of the FHC in particular will unlock material value for the Cornerstone Group, and by extension its existing shareholders, and especially Barita’s minority shareholders, who will now benefit from a broader, integrated financial services platform. Additionally, this strengthens the Group’s ability to identify attractive strategic opportunities for acquisition, enhance its commercial value and further optimize its enterprise-wide risk management. “

The Group plans to share more information with its stakeholders at the appropriate juncture regarding the progress through the steps in relation to the reorganization process.

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