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Why a Caribbean bank decided to invest in Ghana

Republic Bank (RepBank) – an independent Caribbean lender headquartered in Trinidad and Tobago, an island country off the coast of Venezuela – recently bought a significant stake in Ghana-based HFC Bank.

In recent years Africa has attracted investment from firms across the world. Companies located in the Caribbean are, however, not known to be major investors in the continent.

RepBank initially purchased an 8.9% stake in HFC in December 2012, and recently increased its shareholding to 32.02% following the acquisition of shares previously held by private equity firm Abraaj Group. The deal makes RepBank the largest single shareholder in HFC.

HFC was formed in 1990, listing on the Ghana Stock Exchange in 1995. The bank existed as an independent mortgage finance institution until 2003, when it expanded into universal banking, providing a wide variety of financial services. HFC currently has 27 branches across Ghana, and is working to expand its reach.

But why would RepBank be interested to own a part of a Ghanaian financial institution? It seems that some of its clients in the Caribbean are eager to do business in Africa.

“Africa, and in particular Ghana, has been a key growth area for international business, and several of our Trinidad and Tobago corporate clients have been actively exploring those markets,” commented David Dulal-Whiteway, RepBank’s managing director, in a statement released towards the end of 2012.

RepBank also wants to get involved in Ghana’s crude oil industry. Ghana started with offshore oil production in 2011, and the industry has been responsible for much of the country’s rapid economic growth over the past two years.

“RepBank has played a significant role in the oil and gas sector in Trinidad and Tobago and through its investment in and collaboration with HFC Bank, intends to bring that expertise and skill to Ghana for the benefit of the country’s energy industry,” said the company in a press release.

In addition, it also wants a piece of Ghana’s mortgage market, an area where it is a significant player in the Caribbean. “RepBank intends to use its vast expertise in this area to enhance the mortgage offerings of HFC and help to grow that bank’s base, to benefit the home-owning public in Ghana,” said the company.

RepBank is, however, facing some challenges related to the HFC deal. Because of its significant shareholding in HFC, RepBank is required to make an offer for all of the remaining shares. RepBank asked Ghana’s Securities and Exchange Commission (SEC) for an exemption for the requirement to make a takeover offer, but the SEC declined.

According to RepBank, it is currently in discussions on the way forward. It has indicated that it is prepared, and able, to make an offer for all the remaining shares in HFC, should it be mandated to do so by the regulators.

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