UTC Chairman: Is FCB expansion $$ coming from unit holders’ funds?

Unit Trust Corporation Chairman (UTC) Hubert Alleyne  wants First Citizens Bank (FCB) Chairman Ken Gordon to say where the money for FCB’s expansion is going to come from, if not the UTC. “If FCB is not going to use unit holders’ money to achieve growth, then where is the capital going to come from?” he asked in an interview yesterday.  

Alleyne’s comment was in direct response to Gordon’s statement that the proposed merger between the UTC and the FCB would bring “accelerated growth” to both parties. On Gordon’s suggestion that UTC and FCB come together under a holding company, Alleyne questioned where the capital was going to come from, “since Gordon said he was not going to interfere with unit holders’ funds.” Gordon, in his statement on Friday, assured that in the event the  FCB/UTC merger proposal was accepted, it “will not involve any interference with funds of unit holders.” But Alleyne said that in forming a holding  company, things needed to be carefully worked out. He said he could not see a holding company “without interfering with unit holders’ money since all of the UTC funds belong to the unit holders.” 

In his statement, Gordon admitted that he was the one who had suggested the idea of the merger to the prime minister. In an outline proposal, Gordon said the document indicated significant benefits could flow to both the UTC and FCB.  It is important to realise, Gordon said, “that it is the ongoing obligation of every financial institution to constantly seek opportunities for growth.” Alleyne, however, is of the view that FCB appeared to be planning a hostile takeover of the UTC. “From what I have heard, and if I were writing a business case study, it would appear that one party was planning to effect a hostile takeover of the UTC and the funds of its over 400, 000 unit holders by stealth,” he said. Alleyne, in breaking his silence on the issue, said that in order to facilitate this takeover, it appeared that FCB was attempting to enlist the legislative powers of the government, “since FCB did not have the investment capital to effect the bid in the usual way.” 

On the proposed FCB/UTC merger, Alleyne said he was not going to comment until he had more information. “My own view is that until I have more information, I really cannot comment.”  He stressed though that under the UTC Act, the UTC is not allowed to invest in or buy more than ten percent of  any company or corporation. “It is not wise to put all your eggs in one basket,” is all he would say. Under Part 3 of the UTC 1981 Act, paragraph 13, sub section 3, it states that: “In investing in securities, the Board shall not invest more than ten percent of the fund of any one unit scheme in the purchase of securities in any one company or other corporation, nor shall the investments of all unit schemes established by the Board   include at any time more than ten percent of the securities issued by any company or other corporation.” Alleyne noted that while legislation can change the UTC’s ten percent bar, “people are going to ask, ‘Why is it that you are treating FCB differently than any other organisation.’”

Meanwhile, financial sources point out that it was FCB CEO Larry Howai who originally presented a paper to Gordon and who broached the idea that UTC buy some shares in FCB. “It was not an official document,” financial sources said. It was this document, however, that Gordon took and presented to the prime minister, sources said. Neither Gordon nor Howai could be reached for comment.