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Air conditioning company CAC to list on junior market

Published:Friday | December 11, 2015 | 12:00 AM
Steven Marston, chairman and CEO of CAC 2000 Limited.

Air conditioning company CAC to list on junior market

An air conditioning and energy solutions company CAC 2000 Limited will seek to raise $120.5 million from its initial public offering to the junior arm of the Jamaica Stock Exchange (JSE) before year end.

It's the second such float for the month following the prospectus released by tTech last week.

CAC is floating 22.5 per cent or 29 million of the company's total shares. Some 11.25 per cent or 14.5 million shares will be available to the general public for subscription, while the other 11.25 per cent is for key individuals.

Chairman and Chief Executive Officer Steven Marston and Director of Administration and Operations Gia Abraham substantially own the business through a holding company called Caribbean Air Conditioning Company Limited, (CACL).

CAC 2000, based on Marcus Garvey Drive in Kingston and Car Jars Plaza in Montego Bay, sells air conditioning brands, including Carrier, LG, Mitsubishi Electric, Fujitsu, Carlyle, Honeywell, Sanyo, Emerson, TopTech and Fasson.

Funds raised from the $4.89-per-share offer will finance expansion and working capital, the company said on Tuesday with the release of the prospectus for its IPO.

"The company has now positioned itself to take advantage of an increased volume of large-scale projects, such as the air conditioning, in addition to other engineering services, for hotels in Jamaica, and has identified other opportunities within the Caribbean region that are to be realised within the short to medium term," said Marston.

"We have always seen steady growth but, due to cash flow limitations, have declined opportunities. The listing will allow us to go head to head with international companies who bid on local projects. With the increase in projects being invested locally and Caribbean-wide, new markets are opening up for us presently."

Doubled profits

Citing an example of a large-scale project that has impacted the company, Marston said the mechanical, plumbing and engineering aspect of the refurbishing of Braco - "which is a joint venture that we are an equal investor in" - has doubled the profits of the company within six months.

CAC 2000 earned revenues for its financial year ending July 2015 of $824 million, up from $708 million a year ago. It earned total comprehensive income of $37 million, compared with $38 million in 2014. Currently, CAC 2000 holds total assets of $544 million. Shareholder equity of $178 million climbed from $156 million a year ago. The company employs 45 staff of which 10 are engineers.

VM Wealth Management will act as the lead broker to the subscription, which opens on December 16 and closes December 23.

"The general public will have the option to buy just over 14.5 million shares or 11.25 per cent of the total issued shares. An equal amount will be issued to key individuals which includes 9,759,141 shares for key undisclosed stakeholders, seen as integral to the business, at $4.89 per share; 4,256,988 of dividend conversion shares to existing shareholders at a discount price of $0.001; and 500,000 shares to employees at $3.67," the company said.

The listing would reduce the holding of CACL from 65 per cent down to just over 50 per cent. Additionally, the listing would dilute the shareholdings of Howard Chin from 3.09 per cent to 2.4 per cent; Colin Roberts, from 25.68 per cent to 19.9 per cent; and Louis Chin, from 6.18 per cent to 4.79 per cent.

The company aims to list on the junior exchange but must hit a minimum threshold of $50 million under the IPO in order to qualify.

"A few years ago, we did an equity swap issued as a preference share to increase our capital base and we saw immediate growth because we were able to have the working capital to propose on large development projects locally," said Marston.

The company began in the late 1920s as Webster's Engineering, the prospectus states. In the mid-1960s, the ICD Group (formerly the Mechala Group) bought Conditionedair Corporation and merged it with another company to form Conditionedair and Associated Contractors. That company was later merged into the renowned Homelectrix.

The current owners of CAC say that when Homelectrix was sold in the 1990s, the management team purchased 49 per cent of the newly formed Conditionedair and Associated Contractors and incorporated the company on July 24, 2000. The remaining 51 per cent was purchased on August 18, 2000, hence the name CAC 2000 Limited.

A version of this story first appeared online on Tuesday.

steven.jackson@gleanerjm.com