FimBank (UK) Limited, part of First International Merchant Bank plc (Fimbank), has made a cash offer through WestLB Panmure Ltd for London Forfaiting Company plc (LFC).
The long-awaited news has created a much-needed buzz in the forfaiting market the purchase and sale of trade-related receivables on a non-recourse basis. LFC, listed on the London Stock Exchange, was the doyen of the tightly-knit forfaiting community until 1998 when some overstretches in Russia in particular caused a huge dip in its fortunes. The firm closed a few offices and made a few restructuring changes, but has been forking out around US$500,000 a month for salaries alone, amid a depressed forfaiting market and global economic gloom.
The offer is 29.5 pence for each LFC share, valuing LFC at around £31mn. The offer would be financed by a combination of a short-term bridging loan and Fimbank’s own resources. Following completion of the acquisition of LFC, Fimbank intends, subject to the fulfilment of the relevant English law provisions, to use the cash resources of LFC to repay the bridging loan.
Fimbank’s bid has yet to be accepted by the shareholders of LFC, although the firm’s board has recommended it and it looks set to be approved. There were two other bids which have been kept secret.
The announcement is interesting for the forfaiting market because of who the bidder is. Fimbank, until a few months ago, was a relatively unknown Middle East-owned Maltese-based bank, with a few positions in trade finance deals in that region and Africa . Then it hired Margrith Ltschg-Emmenegger from WestLB and everyone sat up and took note of this previously unheard of player (see GTR, Mar/Apr 2003, p6). Ltschg-Emmenegger led WestLB’s forfaiting team to global dominance in the market over several years but quit in January as the bank wanted to concentrate on the core forfaiting product rather than cover affiliated areas such as factoring and securitisation.
If the bid is successful, Ltschg aims to use the LFC brand (which will remain) to build up a global presence for Fimbank in trade finance market. “We want to be global,” says Ltschg. “But there would have to be a substantial restructuring at LFC, with some offices having to close. But it is a powerful and respected brand and one we would be proud of having.”
Following the bid announcement in the UK , Fimbank is to post a detailed offer document to shareholders of LFC as soon as possible and no later than August 19. The offer is subject to a number of terms and conditions including regulatory approval by the Malta Financial Services Authority, confirmation of the findings recorded in due diligence reports on LFC, and a requirement that valid acceptances are received in respect of not less than 90% in nominal value of the LFC shares to which the offer relates.
Fimbank, as offeror, has the right to reduce the 90% threshold to a lower figure of its choice, with the consent of the provider of the bridging finance, provided that such threshold exceeds 50%.
The offer must remain open for acceptance for at least 21 days from the posting of the offer document. Once the offer becomes, or is declared, unconditional in all respects, Fimbank will seek a delisting of LFC from the LSE.
Stathis Papoutes, chief executive of LFC, says that the bid has been the best offered so far and was therefore recommended to shareholders. “We”ve been focusing on survival of the company for the shareholders and this recommendation only extends this.”
He adds: “Personally, I”m taking one day at a time and have made no plans for the future beyond LFC. I feel that at 52 I”m too young to retire, so we”ll see!”