Seprod sells stake in GraceKennedy
Food conglomerate Seprod Limited has sold its stake in food and financial services conglomerate GraceKennedy.
The transaction was executed via a holding company held by Seprod.
"The Seprod board will consider reinvestment options to ensure shareholders value is maximised. These options could include, but are not limited to, reinvesting in its own capital projects to accelerate Seprod's growth agenda," Seprod CEO Richard Pandohie told the Financial Gleaner.
Pandohie acknowledged that the transaction was worth about a billion dollars.
GraceKennedy rivals Seprod for market share in the retail food arena, but the companies also have a business relationship, with Grace-Kennedy Foods USA acting as distributor for Seprod's Butterkist, Ovaltine, and Pronto brands in the United States.
"We are constantly re-evaluating our portfolio to benefit our shareholders. The GK shares did very well for us, and now it's time to move on," said Pandohie, adding that the company still holds some equity in other companies, but, with regard to fixed-income assets, had sold out its Government of Jamaica securities.
The GK stock virtually doubled in price in a year from $64 at September 2015 to just under $128 in August just prior to a three-for-one split of the stock. Investor demand in the stock rose after GK released solid earnings reports in the first and second quarters.
Pandohie declined to say who acquired the GK shares.
Seprod Limited earned $594 million in net profit for its June second quarter, or 135 per cent more year-on-year, due to improved operations and also in part to the appreciation of shares held in GraceKennedy.
Seprod booked $518 million as 'finance and other operating income', which related in part to the 46 per cent rise in the price of GK shares mainly during that quarter.
At the time, Seprod was able to book the unrealised gain from the shares, which remained in its possession in the quarter, because of how they were classified on the company's books.
In August, Seprod's chief financial officer, Angela Cooper, explained to the Financial Gleaner that the GK shares were classified as 'held for trading', allowing the gains to be reflected in 'profit and loss'. She further explained that were the shares to be classified as 'available for sale', then that unrealised gain would instead have gone to comprehensive income.
"Remember that was the booking of gains. There was no sale of stocks," added Pandohie on Thursday about the quarterly results and the treatment of the shares back then.