Sigma set to merge with MMB
THE Mechala Group yesterday said it will merge its
subsidiary company, Sigma Investment Management Systems (SIMS) with Manufacturers Merchant
Bank (MMB) as part of efforts to compete more efficiently both locally and overseas.
The new entity, to be called Manufacturers Sigma Merchant Bank, will be headed by
Mechala's chairman, Joseph M. Matalon, with MMB's incumbent president and chief executive
officer, Peter Melhado, as chief executive officer.
Mr. Matalon's recently restructured Sigma Interests will control 57 per cent of the new
company, Manufacturers interest, including its former owners Peter's father O.K. Melhado
and Cliff Cameron, will control 43 per cent.
The move, which has not yet been given the green light by the Bank of Jamaica (BoJ) or
other authorities charged with regulating the sector, signalled an aggressive new round of
consolidation in the sector. BoJ governor Derick Latibeaudiere was unavailable to comment
yesterday.
Both entities have been through some amount of restructuring in recent years. Mechala has
only recently finished its financial restructuring, which saw the Supreme Court sanction a
scheme of arrangement to pay bondholders a reduced cash payment of 47 US cents on the
dollar in lieu of their investment in the bonds valued at US$100 million. Mechala has sold
off a range of businesses including supermarkets, its Nabisco food operation and its
distribution arm.
Sigma has been regarded as a key asset and among the top fund managers in the island.
MMB had to sell out its stake in the Sugar Company of Jamaica in 1999 to Government after
joining with Tate & Lyle however, it has remained among the top independent merchant
banks and is the island's fourth largest currency trader after, NCB, BNS and Citibank.
Mr. Matalon said that although they were working on a timetable for completion of the
merger within the next 90 days, it would be subject to approval by the regulatory
authorities. This includes the selection of the 12-member board, nine of whom will be
drawn from the shareholding group and have already been tentatively selected. They are Mr.
Matalon, chairman; Paul Hanworth, Allan Lewis, Sandra Shirley, Colin Steele, O.K. Melhado,
Clifton Cameron, Peter Melhado and Adrian Keys. Three external directors are to be named
in future.
When the company is merged, Mr. Matalon said, Manufacturers Sigma will have $500 million
in capital and will be managing total assets of about $20 billion.
"With the opportunities for growth, we had no interest in selling Sigma
outright," Mr. Matalon said.
Mr. Matalon said that while the structure and organisation of the new entity was being
finalised, managing director of Sigma, Sandra Shirley, and chief operating officer of MMB,
Adrian Keys, have been named senior vice-presidents of the merged entity.
In announcing the merger during a press briefing at Le Meridien Jamaica Pegasus Hotel, New
Kingston yesterday, Mr. Matalon said the company was "not in a position to make any
definitive statement about the size of staff and allocation of responsibilities at this
time." He said that while they were expecting to realise some economies of scale,
they were also positioning for further growth.
Mr. Melhado, who has been working on that aspect of the restructuring exercise along with
Miss Shirley, said it was "very difficult for us to say at this point what level of
redundancies or duplication there will be. Our main aim is growth and we want to make sure
we are well staffed and properly equipped to go. There may be some levels of duplication,
we are working through that now." About 120 persons are together currently employed
by MMB and Sigma.
Mr. Matalon said the decision to combine the operations of Sigma and MMB was based on the
need for both organisations to gear themselves to compete even more effectively,
"given current trends in the financial environment both nationally and
internationally."
Those trends were based on the twin objectives of having sufficient scale of operation to
be able to deploy cutting-edge and customer-based technology, and sufficient product width
that customers could fulfil most, if not all, of their financial needs under one roof.
Manufacturers Sigma Merchant Bank will be based in New Kingston.
The chairman said the merger represented the coming together of two entities, with Sigma
being one of the fastest growing securities dealers and its unit trust once again ranked
as the number one performer in 1999. MMB is the second largest independent merchant bank,
the fourth largest authorised foreign exchange trader and has a strong presence in the
corporate and investment banking market.
Mr. Melhado, addressing concerns about another Mechala subsidiary, Sigma Unit Trust
Managers which was launched six years ago, said that while it would become a wholly-owned
subsidiary of the merged entity, it would retain its original name with a separate board
of directors.