03 September 2003

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Groundbreaking buyout, soaring profits leave investors non-phased

- FIMBank emerges triumphant in battle for London Forfaiting

By David Lindsay
Despite having announced that its profits for the first half of this year had leapt more than twice as high as last year’s and after announcing Friday it had emerged triumphant in its battle to acquire the world-leading London Forfaiting Company, Malta’s investing community still appears numb to the enormous growth potential Malta Stock Exchange-listed First International Merchant Bank holds at the moment.
On Monday the Bank, which walked in for business at London Forfaiting the same morning, announced that profits for the first six months of the year had increased from USD391,615 in 2002 to USD889,165 this year. Earnings per share for the period had likewise risen from USD0.85c to USD1.93.
Gains like these are promising, but even more appealing is its successful buyout of the London Forfaiting Company. The acquisition had been somewhat touch and go over the last weeks, after a rival bid had appeared. But it was back-slapping all around on Friday when FIMBank announced it had emerged with the keys to LFC, a world leading forfaiting company. Incorporating LFC’s operations into FIMBank is expected to be lucrative for the now quickly growing local trade finance bank.
The deal is significant in a number of ways: FIMBank has now placed itself in a position to become the world’s leading bank dealing in the area of forfaiting; FIMBank shareholders can now prospectively look toward higher dividends and a growing value for their shares; FIMBank has now marked itself as the first Maltese business to purchase an internationally listed firm; and the bank has also become the first Maltese bank to purchase a foreign bank.

FIMBank will be carrying out a major restructuring exercise and will accordingly be transferring much back office administrative operations to Malta, where the now ‘merged’ companies’ nerve centre will be located.
But despite the attractions, interest in FIMBank’s US dollar denominated shares has been sparse. In fact, Monday had seen no trading in FIMBank shares. But yesterday matters began to pick up, with 12,700 shares changing hands in three separate deals all the unchanged price of USD1.17 .
Malta-based First International Merchant Bank announced Friday it has prevailed in the battle to purchase the London Forfaiting Company after sparring off with rival bidder British corporate raider Jonathan Rowland.
FIMBank had initiated a takeover bid on 22 July, which was later seized upon by Resurge, a company run by Rowland. However, FIMBank’s hard cash offer has proved more attractive than Resurge’s share offer to LFC shareholders, 65 per cent of which have put their stamp of approval on the FIMBank offer.
FIMBank Executive Vice President and internationally renowned forfaiting expert Magrith Lutschd-Emmenegger on Friday referred to the deal as a "paramount transaction".
FIMBank has paid GBP30.9 million for LFC - a tidy sum indeed, but the return on its investment is expected to greatly overshadow the expenditure.
FIMBank’s growth potential is now 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 has now successfully placed itself in pole position to do just that.
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 starts LFC operations 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 reach a break even point by the end of the year.

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