Pan-Jam, Jamaica Producers gain $1.3b from sale of Mavis Bank Coffee Factory
The deal for Mavis Bank Coffee Factory was valued north of $1.3 billion, according to newly released financial reports.
Joint venture partners Pan-Jamaican Investment Trust and Jamaica Producers Group sold the coffee operation at the end of summer to Specialty Coffee Investments Company Limited (SCI) without disclosing the terms of the transaction.
Now their third-quarter reports show that Jamaica Producers booked a gain of just under $650 million from the sale, while Pan-Jam made a slightly bigger gain of $665 million - totalling $1.315 billion between them.
Back in September, Jamaica Producers CEO Jeffrey Hall said the partners paid the Jamaican government $243 million in total to acquire Mavis Bank in 2011.
Pan-Jam, a property conglomerate and equity investor, more than doubled its earnings in the September 2016 quarter as a result of the sale of the coffee operation; while Jamaica Producers grew profit fivefold, also helped by proceeds from the sale of the coffee assets.
"During the third quarter of 2016 the group completed an exchange of securities that resulted in the divestment of its shareholding in Mavis Bank Coffee Factory Limited. This resulted in a gain on disposal in the quarter of approximately $665 million. The year to date net profit includes the impact of this gain as well as a gain of $185 million realised on the disposal of our interest in Hardware & Lumber during the first quarter," said Pan-Jam chairman and CEO Stephen Facey in a statement accompanying the financial report.
The conglomerate made $1.3 billion of net profit in the quarter, up 143 per cent $534 million a year earlier. Over nine months, Pan-Jam made $2.9 billion, up from $1.9 billion a year earlier. Some of the gains also related to improved returns from its holding in Sagicor Group.
Jamaica Producers made $851 million in the September quarter, up from $164 million. Profit over nine months expanded to $3.5 billion, compared to $713 million at the same point in 2015.
"This record profit resulted from a series of specific initiatives over several years in which the group has used an acquisition strategy to deliver value for shareholders in speciality food and drink, while positioning the group as Jamaica's leading private investor in the logistics business," said Chairman Charles Johnston in his statement to shareholders of the company.
"JP's acquisition strategy has been very successful," Johnston added. "In the case of MBCF, the gain recognised by JP in the third quarter, together with the dividends and other distributions received during the five years of ownership by us, resulted in an average annual return to JP of over 65 per cent."
Jamaica Producers' outsize performance year to date is largely related to its decision to reclassify port company Kingston Wharves Limited as a subsidiary. The transition from an associate company in the second quarter of the year resulted in gains of $2.5 billion.
In September, SCI, a company connected to Michael Lee-Chin, acquired the shares in MBCF from both JP Tropical Group Limited, a subsidiary of Jamaica Producers Group, and Scotts Preserves Limited, a subsidiary of Pan-Jam, each of which owned 50 per cent of the company.
The acquisition was Lee-Chin's second coffee deal in the span of three years.
The directors of SCI, according to Companies Office records, include Lee-Chin, and Mark McIntosh, the chief executive officer of Wallenford Coffee Company. Lee-Chin acquired Wallenford in 2013 through AIC International.
Mavis Bank was a loss-maker when it was acquired by the joint venture partners in 2011 "but recorded operating profits in every year since the acquisition, with record profits recorded in the last financial year," Jamaica Producers said in September when it confirmed the sale to SCI.
The coffee factory has been operating in the Blue Mountains for over 90 years and has long-standing trading relationships in Asia, Europe, and North America. It also produces the market-leading Jablum brand of Jamaica Blue Mountain Coffee.