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Jamaican Teas targets ‘significant’ stake in new company

Published:Friday | August 3, 2018 | 12:00 AM
John Jackson, acting chairman of Jamaican Teas Limited and chairman of KIW International Limited.

A plan by Jamaican Teas Limited to issue new shares got shareholder approval on Tuesday, setting the stage for the company to fund new investments.

Acting chairman John Jackson said the beverage company, which also operates a real estate arm and a grocery business, was being offered various deals and the board wanted to be in a position to take advantage of them.

However, the resolution introduced at the extraordinary meeting to vote on the rights issue indicated that the company already has a deal in sight, and is in discussions "to acquire a significant interest in a target company".

Shareholders voted in favour of a renounceable rights issue that will offer up to 300 million additional JAMT shares to existing owners of Jamaican Teas; or alternatively for the board to issue the JAMT shares directly to the sellers of the shares in the 'target' company in which Jamaican Teas aims to take an interest.

The approval has a shelf-life, however, and must be acted on prior to the company's 2019 annual general meeting.

Jamaican Teas' last acquisition was a 43 per cent stake in KIW International for $57 million in 2017. Months later, it sold real estate owned by KIW for $160 million and poured some of the proceeds into equity investments. That portfolio is now worth about $189 million.

"From time to time, we look at various opportunities that come along. We took a position in KIW and we made a gain as a result of that acquisition. Once we are seen as being into that type of business, opportunities and offers are likely to come our way. We have seen it in the real estate area where people have lands and they have made approaches to us," Jackson said at the meeting.

Flush with opportunities

The board sees the capital markets as being "flush with opportunities", and within that context decided to approach shareholders about a prospective rights "and that the directors be empowered - if we decided to proceed with such an issue - to price the shares and determine the terms attending," Jackson said.

At Tuesday's trading price for JAMT shares, the 300 units would be worth nearly $1.25 billion.

Jackson said the company had more than $1 billion of equity, and the option of raising debt financing by tapping a line of credit held with Bank of Nova Scotia. He added, however, that the preferred fundraising route was additional equity via the share issue.

Meanwhile, Jamaican Teas is reporting a dip in nine-month profit from $149 million to $131 million at June 2018. However, the company says the variation largely resulted from the one-off gain of $30 million booked from the KIW acquisition. Group sales climbed from $1.2 billion to $1.3 billion in the period.

As to the future plans for KIW International, its owners will be moving ahead with the successor company to replace it, but is now targeting the main market rather than the junior stock market for listing. The latter avenue was nixed by the Jamaica Stock Exchange.

KIW's board, which is also chaired by Jackson, is still considering whether to go public via an initial offering of shares, maybe in 2019, or to do a rights issue.

"We are forming a new company and we are hoping that we will raise capital in the market with that new company. All the details have not yet been worked out," Jackson said.

"It's still fairly fluid. But what we are hoping is that when that company is formed Jamaican Teas will start off being the majority shareholder in it and we will make a proposal to the KIW shareholders for them to swap shares in KIW for shares in the new company. Thereafter, we will decide how to proceed," he said.

KIW was formed in 1908 to provide industrial repair services to sugar estates. Its main income was generated from the rental of factory and warehouse space at its location at 138 Spanish Town Road in Kingston. KIW was previously listed on the JSE in 1999, but was subsequently delisted after its principals changed.

KIW plans to seek out a broker and be guided by their advice on how best to approach the market, Jackson said. The company held $208 million in total assets at the end of its last financial year in September 2017, which was changed to coincide with Jamaican Teas' reporting period.