13 August 2003

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FIMBank to extend LFC offer for an additional week as rival bid rumoured

By David Lindsay
Malta-based First International Merchant Bank is to extend its takeover bid for the London Forfaiting Company for an additional week, FIMBank General Manager Raymond Busuttil told The Malta Financial and Business Times yesterday.
FIMBank’s historic buyout offer, probably the most exciting venture underway by a Malta Stock Exchange-listed company, had expired yesterday afternoon amid the possibility of a rival bid emerging from the woodwork toward the end of the week.
It is not known at the moment whether the extension comes as a result of the rumours or in order to allow the Bank time to garner the 90 per cent LFC shareholder approval it seeks as a prerequisite to purchasing the international forfaiting house. A 90 per cent approval would open the way for FIMBank to carry out what is called a ‘white wash’ exercise - effectively delisting the company from the London Stock Exchange and integrating it completely with FIMBank’s operations.
As matters stood yesterday morning, FIMBank had secured at least a 52 per cent LFC shareholder approval, while Busuttil commented such approval had reached "a certain level" without divulging any numbers.
But if the bid does go through, FIMBank stands to become one of the world’s leading trade finance banks, effectively instilling enormous growth potential for the Bank and its share price.
However, following FIMBank’s initial bid for LFC, well-known British corporate raider Jonathan Rowland launched his own discussions –through financing company Resurge - with LFC’s board, which hold the potential of bettering FIMBank’s GBP30.9 million bid. In fact, it is thought Rowland, a joint managing director of Resurge, will offer not less than GBP34 million for the potentially lucrative takeover, if it decides to capitalise on the opportunity.
In a London Stock Exchange company announcement released on 8 August, Resurge states, "Resurge remains a potential bidder for LFC despite the imminent first closing date [yesterday] of the cash offer by FIMBank…for LFC. Resurge intends to continue its discussions with the Board of LFC, its advisors and its shareholders with a view to concluding negotiations as soon as possible. In the interim LFC shareholders are urged not to accept the FIMBank offer."
In another statement issued just Monday, Resurge states, "Resurge intends to review its position in light of the results of the first closing of the initial offer from FIMBank."
FIMBank’s initial offer closed yesterday afternoon and an announcement on the London Stock Exchange from the London Forfaiting board is expected this morning. It is thought likely that Rowland will wait to see the level of support shareholders give the FIMBank offer before making his bid, but a new offer could be put forward by Rowland as soon as Friday.

If Resurge’s bid is successful, London Forfaiting will have to pay a GBP310,000 fee to FIMBank for reneging on its offer.
But if the deal goes through for FIMBank, the potential is great and wide-ranging. The London Forfaiting Company is recognised as market leader in forfaiting, with what is considered to be the best client base of exporters and importers in the world.
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.
While LFC is the closest a forfaiting company can get to being a household name, neither is 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 they 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 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.

Copyright © Newsworks Ltd. Malta.
Editor: Saviour Balzan
The Malta Financial & Business Times, Newsworks Ltd, Vjal ir-Rihan, San Gwann
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