Cornerstone’s roots deepen among Ja’s top tier
THE PRIVATELY held Cornerstone Group, which recently received the greenlight from the central bank to reorganise into, and seek a licence as, a financial holding company, has valued itself just shy of US$1 billion, or $152 billion, which would place it in the top tier of Jamaica’s financial conglomerates based on book value.
But the valuation of US$920 million, as recorded in Cornerstone’s financial statement up to September 2022, does not include MJR Real Estate Holdings Limited, which is held off balance sheet and was one of two companies the Bank of Jamaica (BOJ) told Cornerstone United Holdings Jamaica Limited, CUHJL, it has to bring onto the books for its financial holding company application to advance.
The other was Barita Investments, a brokerage company that is listed on the Jamaica Stock Exchange, which accounts for the lion’s share of CUHJL’s assets.
Cornerstone Group’s net assets have hovered at US$566 million.
Wednesday Business saw portions of Cornerstone’s financial statement, including segments relating to its asset value and covering the investment vehicles, the Jamaica-registered CUHJL and Cornerstone Financial, which is registered in Barbados.
The size of Cornerstone’s book valuation is remarkable for the fact that it was launched only seven years ago by founder and CEO Paul Simpson, Chairman Mark Myers, among a dozen or so core investors, whose first significant venture was the acquisition of a small merchant bank.
Four-fifths of the group’s assets are held by Cornerstone Financial, the Barbados entity, which itself holds its majority stake in Barita Investments. Cornerstone United holds the assets of the investment bank, MF&G Merchant Bank.
The group acquired 80 per cent of MF&G Merchant Bank, then owned by the law partnership Myers, Fletcher & Gordon, in 2016. Cornerstone acquired the remaining 20 per cent in 2019.
The group’s next big move was in 2018, when the Barbados-based vehicle was used to acquire roughly 75 per cent of Barita Investments, then a private company controlled by its founder Rita Humphries.
Barita was listed in a major IPO, and a sharp rise in its share price on the market amid two rights issues augured well for Cornerstone Financial.
According to the Cornerstone financial statement seen by Wednesday Business, the company values its Barita investment, using the company stock price on the Jamaica Stock Exchange. Barita’s market capitalisation at the time of the audited accounts approximated US$604 million.
In essence, Cornerstone’s combined companies are worth more than many large financial conglomerates.
For instance, on a net assets basis, NCB Financial Group, with capital $172 billion in capital, or about US$1.1 billion, was about twice as large as Cornerstone, while Sagicor Group Jamaica with J$116 billion in capital, or roughly US$760 million, as at December 2022 is, by the same measure, a third bigger. Scotia Group with $105 billion, or US$695 million, has 23 per cent more in net assets.
However, JMMB Group with J$48 billion, or about US$317 million, in net assets, and Proven Group with US$140 million, among others, are by that measure smaller than Cornerstone.
Earlier this month, Cornerstone announced plans to reorganise its Cornerstone United and Cornerstone Financial into one financial holding entity and received a no-objection report from BOJ. The central bank has made clear, however, the fact that its non-objection doesn’t mean an automatic licence for the entity that emerges.
The holding company, which is expected to be listed on the Jamaican exchange, will hold subsidiaries including Cornerstone Trust & Merchant Bank, Barita Investments Limited, and its subsidiary Barita Unit Trusts Management Company Limited.
Structuring the companies in a group will take time and requires approvals from the courts and shareholders.