Veteran trading house Barita Investments Limited has announced its first foray into the equities market, saying it will be offering up 30 per cent of the company to new investors in a hunt for capital to fund its next big move - into pension funds.

The initial public offering, which aims to raise $1.1 billion in cash, opens for subscription December 7 to 15.

Barita is placing on the market 200 million issued shares at $2.50 per unit; 100 million of convertible variable rate preference shares; and another 100 million redeemable variable rate prefs.

The prefs are to be priced at $3 each, Financial Gleaner has learned.

The company voted November 4 to increase its authorised capital, which now stands at one billion ordinary shares and 500 prefs.

As part of the public offer, existing Barita shareholders have put 20 million of their own ordinary shares up for sale, with the other 180 million coming from authorised capital.

The effect, assuming full take up of the offer, will be a growth in issued ordinary shares to 585.7 million, up from 405.7 million.

Just how much the holdings of principal owner and chair, Rita Humphries-Lewin, would be diluted under the offer was not made clear immediately, but a substantial majority chunk of the shares is expected to remain in her possession.

The company also says it reserved 50 million ordinary shares for a share purchase by its directors and staff planned for June 2010.

Barita's principals say the public offering, a precursor to listing on the Jamaica Stock Exchange after 32 years of operation, is designed to shore up its capital base, currently valued at $849 million, according to information disclosed by the company, and provide a major springboard into the lucrative $200- billion private pensions and foreign currency markets.

Rita Humphries-Lewin, the Barita chairman, who has been a major player in the equities business since working as the sole female trader 47 years ago, said this week that the money being raised will go towards increasing capital adequacy, which is critical for the pension funds management Barita intends to enter in a big way.

Barita's current capital adequacy level is said to be at 54 per cent, which is already 44 percentage points above the 10 per cent requirement of regulator, the Financial Services Commission (FSC).

But company officials say that this capital sufficiency profile could change when risks associated with pensions are factored in.

Officials of the FSC told the Financial Gleaner this week that the capital adequacy ratio for pension management was not yet legislated, and that it was up to the financial firms to determine their requirements from their own assessment of inherent risks.

The FSC has been relaxing the strictures governing pension funds, a move that has already spurred the unveiling of a slew of retirement saving products by several financial institutions, aiming to entice the estimated 90 per cent of private sector employees not now covered by any pension arrangement.

Strategic planning

The sale of 30 per cent of Barita has also been done with an eye on succession planning, said Humphries-Lewin, who told the Financial Gleaner in an earlier interview that she now prefers the golf course to the day-to-day management of the business.

Her focus will be on strategic planning for the business whose total assets are valued at $11.8 billion.

Humphries-Lewin, herself a former JSE chairman, said Barita's planned listing is being done amid changes in stock exchange rules in April, including the relaxation of requirements to publish the prospectus in total.

Barita's principals have pointed out that the company has grown through the accumulation of profit and not by loans or capital injection. In fact, the company is now debt-free, they have said.

From $40 million in 2000, Barita's pre-tax profits are at $127 million at September 2009. Its peak year was 2004, with pre-tax income of $140 million.

Barita general manager Ian McNaughton said, at the IPO announcement, that the firm reduced operating expenses from a high of 58 per cent of revenues of $91 million in 2000 to 15 per cent of its 2009 revenues of $1.9 billion.

"The company, apart from growing revenue exponentially has managed costs efficiently. We seek to lead with information technology to improve this even more," McNaughton said.

Barita had already completed the merger of its investment arm with its wholly unit trust subsidiary preparatory to listing on the JSE, a move that also spurred the split off some two years ago of its portfolio management operation, whose directors opted to keep that business in private hands.

avia.collinder@gleanerjm.com