Mavis Bank coffee deal to close Sept, but factory control undecided

Correction & Clarification

Jeffery Hall was incorrectly identified as CEO-designate of Jamaica Poducers Group in a file photo carried with the story 'Mavis Bank coffee deal to close September' in the Financial Gleaner of June 17, 2011. Mr. Hall is the chief executive officer. We regret the error.

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Steven Jackson, Business Reporter

The acquisition of Mavis Bank Coffee Factory (MBCF), the largest processor of Jamaica Blue Mountain coffee, should be wrapped up by September, according to Peter Melhado, the joint chairman of MBCF and its negotiating committee.

But Melhado has left hanging questions about who will have operational control of the asset after the deal is closed.

There is "a lot of ground to cover" but "within three months we are expected to finalise all the various elements of the negotiation," he told the Financial Gleaner on Wednesday.

On Tuesday, food and shipping conglomerate Jamaica Producers Group said that complicated factors relating to the age of the company, heavy government regulation by the Coffee Industry Board, and the factory's iconic brands, including Jablum, had prolonged negotiations for the acquisition of MBCF. The age of the company is a likely reference to the condition of assets employed at the 88-year-old processing operation.

But Melhado sought to allay concerns of an impasse.

"The spirit of the negotiations is excellent. There is a 'duty of care' involved, since we are handling a public asset," he said.

"There are no sticking points, whatsoever. It is the normal course of negotiations and we have very good meetings."

Speculation also arose that the factory and farm assets would be sold but not the iconic brand Jablum, but Melhado dismissed the latter suggestion outright.

"It is a part of the group," he said.

Mavis Bank owns three brands: Jablum, Daily Cup and MBCF.

In April, managing director at Development Bank of Jamaica (DBJ), Milverton Reynolds, officially announced that JP and Pan-Jamaican Investment Trust Limited were selected as the preferred bidders for the bank's majority stake in MBCF.

The two companies submitted a joint bid following a public tender process. Cabinet subsequently approved the DBJ's recommendation.

DBJ will sell its 70 per cent some 408 shares while Keble Munn and family will likely continue to own the other 30 per cent, or 175 shares, Melhado reasoned. It, however, is uncertain which of the three entities will dominate the executive body and direct the factory's operations.

"We have not yet finalised what the structure will look like. But there are many ways to skin a cat," he said.

Hall, however, appeared to signal that he and partner Pan-Jamaican Investment Trust expect to be the dominant parties.

"JP and Pan-Jam are joint bidders and expect to be represented at the level of board and shareholding," he said Thursday.

Mavis Bank is managed by Senator Norman Grant, who is the chief executive officer.

Grant declined to say whether both DBJ and the Munns were currently on the board of directors, but added that all shareholders have a right to be represented at the board level.

Asked if the Munns or DBJ have an active role in directing the company, he said: "MBCF as a company has its own management team, of which I am the managing director and CEO."

"It is premature," he added, "to speculate at this time during the process of negotiations. I also want to assure the 6,000 coffee farmers and local and overseas purchasers that we are operating as usual - buying and processing coffee."

Companies Office records name the directors as management consultant Dennis Boothe, Grant, Melhado, Hugh Reid, and Diana Thorburn.

MBCF, located on 12 acres of land in the Blue Mountains, wasstarted in 1923 by Victor C. Munn, an English planter and processor. The factory receives coffee beans from thousands of farmers in the Blue Mountains.

Seventy per cent of Mavis Bank fell into Government's hands in 2004 when the National Investment Bank of Jamaica acquired the stakeholding as part of a restructuring of debts owed by the company.

The DBJ, which absorbed the operations of NIBJ five years ago, wants the new investors to undertake the financing, development, operation, and management of the business, and pay for its interest in the company.

Close to one million pounds of beans are exported in barrels and bags under the MBCF trademark in the green bean form, with the remainder roasted and packed in vacuum bags under the Jablum brand. The Jampro investment guide indicates that revenue over the last few years ranged between US$8 million and US$11.6 million per annum.

Demand in Japan

Sales have been affected by falling demand in Japan. The company has been trying to grow its markets in North America to make up for the displaced Asian income.

Mavis Bank's green beans are marketed by the Munn family-controlled Blue Mountain Coffee Inc (BMCI). BMCI, established in 1990 and located in Gainesville, Georgia, in the United States, is involved in the marketing, distribution, and roasting of the coffee. The operation is run by Edgar Munn, the nephew of Keble Munn, a former government minister of the 1970s and pioneer and principal of the Munn family's coffee interests.

BMCI has expanded the green bean, roasted-and-ground products market in the US. Mavis Bank's performance in 2009 represented a turnaround from 1997, when 99 per cent of export sales was to the Japanese market, with only one per cent to the US.

MBCF has also been working with BMCI on introducing smaller barrel sizes, targeting mini-roasters as a means of increasing demand.

steven.jackson@gleanerjm.com