LET UTC, FCB ACQUIRE SHARES IN EACH OTHER

The Chairman of the Trinidad and Tobago Unit Trust Corpora-tion, Hubert Alleyne, has been diplomatically correct on the issue of the proposal of a merger between the UTC and First Citizens Bank Limited, preferring instead to deal with matters raised by First Citizens Bank Chairman, Ken Gordon.

Yet it may very well have been Alleyne’s clear urging of privatisation of the Unit Trust in his Chairman’s review in the 2002 annual report of the Corporation, which had hastened the proposal by FCB for closer association with the UTC. Alleyne appeared confident, or was it hopeful, in his Chairman’s review that the UTC Vesting Bill, which had first been advanced by the former United National Congress Administration in 2000, would be passed by the present People’s National Movement Government. Passage of the Bill would result in divestment of the Unit Trust Corporation, its being converted into a limited liability company, and listed on the Trinidad and Tobago Stock Exchange. Undoubtedly, the publicly-owned Corporation, which recently anno-unced funds under management in excess of $10 billion, a whole year before it had been projected to reach this landmark, is your proverbial plum. Its performance and enviable market share since its inception in 1982 has meant that it stood seductively for years before the collective Tantalus of large investors, appealing but inaccessible.

The UTC Chairman unfortunately, however, did not develop an argument in his Chairman’s review that the result of the non-passage of “enabling legislation” had been the “loss of wealth and opportunity, especially to the small unitholder.” Had other mutual funds in Trinidad and Tobago demonstrated an even more spectacular growth than that of the UTC, such growth would have been a powerful marketing tool in advancing the cause of privatisation. But in commenting about “loss of wealth and opportunity, especially to the small unitholder,” the point that the UTC Chairman appears to be making is that he envisions a situation, with divestment, in which small unitholders (among others) having been attracted by the concept of the Unit Trust and profited from its favourable returns, would have sought to invest in a privatised entity, and further benefited from future dividends. He may have even had in mind a provision through which a percentage of the shareholding would have been reserved for unitholders. It would not have been altogether dissimilar from Government’s plan in the middle 1980s for the cement company, when the administration in divesting the company had reserved a certain volume of shares for the workers. But as nice as all this may sound, there is the troubling possibility that large investors may seek to buy out the shareholding of small unitholders. Add to this the possibility that foreign investors may be also interested.

There is a strategy Government can pursue, through which with planned distribution of shareholding it can avoid a divested Unit Trust Corporation being dominated by large (possibly foreign) investors, even as it satisfies, albeit partially, those opposed to a merger with First Citizens Bank. It will need to tap into a highly successful tactical move of RBTT and Guardian Holdings Limited, which saw each corporate entity acquiring a 20 percent shareholding in the other. The mechanics should not prove too difficult to work out, and Government can presumably decide on a mutual investment of say 30 or even 40 percent. In turn, it can reserve 11 percent of the total shareholding in each company for itself, ten percent for the National Insurance Board and a further ten percent for credit unions! Alleyne, who is a former senior official of RBTT, will be more familiar with the RBTT, Guardian Holdings purchase of a 20 percent shareholding in each other’s financial institution, than most people, and not merely with the mechanics, but with the phenomenal success of it all. The overall concept of planned distribution of shareholding in FCB and UTC is critical to both. Had this not been in place at the time of the relatively recent takeover bid by Cemex of Trinidad Cement Limited, then the cement company with its subsidiaries, Caribbean Cement Company Limited, in Jamaica, and Arawak Cement Company, in Barbados, would have been in foreign hands. Let the games begin!