What is Ansa McAl looking at when it attempts to put a price on Banks DIH? The common way to evaluate a company is to look at its various operations and subsidiaries separately and put a price on each one based on their net asset value and contribution to earnings.
Ansa McAl is said to be close to making an offer for the company after a team of bid advisers flew to Trinidad to work on an offer document.
In the case of Banks DIH the brewery is seen as valuable both in its physical assets but also in the "Banks" brand. As part of Ansa McAl it may have more value since it might have new markets outside of Guyana. But one component of the group that may be being overlooked is Citizens Bank in which Banks has a 51% share.
It has returned healthy profits despite the problems in the sector, with Earnings Per Share (EPS) in 2000 of $1.87; 2002 $2.56; and 2003 $3.25. Given that Banks has announced earnings increased by 44% that would make the 2004 EPS $4.68.
The banking licence is also seen as valuable given that obtaining one is getting harder and harder. The Caribbean Single Market and Economy requires the free movement of financial services and this could mean greater lending opportunities.
In 1998 Banks paid $394M to acquire its 51% stake which is a premium over the then Net Asset Value of $76M. This premium is called goodwill and generally to buy a going business some amount of goodwill has to be paid before shareholders can be interested in selling. Locally Trinidad's Republic Bank paid $100 per share for its stake in NBIC when the net asset value was $22.87.
How much would be the goodwill for the Banks group? That would depend on how the investor sees the other operations, including the bakery, the biscuits, the soft drinks and the fast food outlets.
But one observer notes that Ansa McAl would likely have to set a price per share in excess of the group net asset value of $12.54, even if those peripheral assets were not what they are after.
The observer notes that Banks' portion of earnings from Citizens Bank in 2004 was $143M and the company contributed $677M. What kind of multiples an investor would place on these earnings depends also on their own plans and to date these remain a mystery.