Mon | Dec 11, 2017

KIW shifts focus to investments - Reassessing market entry strategy

Published:Wednesday | November 22, 2017 | 12:00 AMAvia Collinder
John Jackson, chairman of Jamaican Teas Limited.

John Jackson, chairman of KIW International, indicated this week that the company's plan to re-enter the stock market via introduction of its shares on the Jamaica Stock Exchange has been nixed by the authorities.

KIW had planned to list its shares on the junior market by 2018. Instead, the company was told it will have to offer its shares on the exchange via a public offer - forcing KIW to reassess its strategy to go public.

"The latest information we received is that to list on the Jamaican market will require a public issue, so we plan discuss same as that information just came to us last week," Jackson told Gleaner Business.

" ... We will have to determine the amount if we proceed with the JM listing, which is our preference," he said.

KIW was once listed on the main market of the exchange, but delisted at the end of November 1999. It is now targeting the junior market, where it qualify for 10 years of tax breaks. Jackson surmised that it was their choice of the junior market, having been previously listed on the main market, that prompted the decision by the regulators.

Options on the table for market re-entry include an initial public offering, as well as a renounceable rights issue first offered to shareholders and then to the public, if not fully taken up, Jackson said on Monday.

Jamaican Teas Limited acquired a stake in KIW from the Jamaican government in a deal worth $57 million, earlier this year.

Jamaican Teas acquired 43 per cent of the ordinary shares, as well as preference shares, but has grown its holdings through purchases from minority owners, said Jackson, who also acts as chairman of Jamaican Teas.

Its ownership of KIW's ordinary shares still falls below 50 per cent. "But, from an effective standpoint, a practical standpoint, Jamaica Teas controls this company," Jackson asserted.

The teamaker, which also operates a real estate arm under subsidiary H. Mahood & Sons Limited, said previously it was weighing a possible a merger of that subsidiary with KIW. It also briefly considered developing the KIW complex as public warehousing space.

 

NO RESTRUCTURING

 

But the chairman now says there is no restructuring on the cards for KIW, and that the company is primarily focused for now on investing its own funds.

"The plan for 2018 is management of our investment portfolio," he said. "If we go to the IPO, it would be an expansion of this role initially until sometime down the road when we think it would be opportune to add some other things," he said.

The company holds cash and equity investments valued at just over $81 million, noted the chairman.

At midyear, Jamaican Teas sold land acquired in the deal for just over $200 million to Abe Dabdoub's Tools and Hardware Limited. The land was handed over at the end of October.

The KIW preference shares were also redeemed shortly after the acquisition of the company.

"We decided to repay them - the conversion was posing a little bit of challenge for us in terms of valuing the company. We felt it was a cleaner and less costly exercise to redeem them," Jackson said.

Underpinning the plans to go public is the objective of restoring faith in KIW, according to the chairman, who also noted that the company's growth strategy would focus primarily on the equities market.

"Other things may come forth. But we believe that the stock market in Jamaica is likely to offer the best rate of return over the next two to three years. If the returns are attractive enough we will be trying to take advantage of them," said Jackson.

"We are trying to restore faith in the company to where it was. There are not many companies that have been delisted, which have come back."

KIW's total investments and cash holdings were estimated at a combined $205 million in its financial year ending September 2017, said the chairman, who noted that equity investments contributed $66 million to the portfolio. The company will make a capital distribution of $10 million to shareholders in December.

KIW International Limited, formerly Kingston Industrial Works, was formed in 1908 to provide industrial repair services to sugar estates. KIW's main income was generated from the rental of factory and warehouse space at its location at 138 Spanish Town Road in Kingston, the property that was sold off in October.

avia.collinder@gleanerjm.com