Mon | Sep 16, 2019

Blue Power shareholders approve company split

Published:Friday | August 16, 2019 | 12:21 AM
Dhiru Tanna (right), founder of Blue Power Group Board Chairman, and Janett Robinson Numa, speak at the Blue Power Group Limited annual general meeting and extraordinary general meeting at the Guardsman Group headquarters, 107 Old Hope Road, Kingston on Wednesday, August 14, 2019.

Blue Power Group shareholders approved resolutions on Wednesday that will lead to the demerger of its soap and lumber operations. The aim is for both companies to trade on the Jamaica Stock Exchange, JSE.

The group hopes to list its Lumber Depot division as its own company on the junior market “within a few months”, subject to approval by the JSE, said Blue Power Chairman Dr Dhiru Tanna. Blue Power’s shares were listed on the junior market of the JSE in 2010.

The company anticipates that in listing Lumber Depot, it will receive the 10-year tax break afforded to entities listed on the junior market. Blue Power Group’s own tax breaks are coming to an end, which means it will revert to paying the full 25 per cent tax rate applicable to non-regulated companies.

Tanna said that the benefits of splitting up the company include the tax break and better reflection of performance of the divisions.

“But it is not even about the tax break,” said Dr Tanna. “The easiest way to grow is through acquisition rather than organically from scratch. So this is the notion we are promoting, but it doesn’t guarantee in any way that we will go this route,” he said.

Blue Power Group holds $897 million in total equity split between the soap division, at some $730 million, and the lumber division at $167 million.

Blue Power Group has 564 million issued shares units. Under the demerger, each shareholder in Blue Power will get an equivalent number of shares in the new Lumber Depot, while lawyers representing Blue Power will hold a single share in Lumber Depot. Upon approval for listing, Lumber Depot will sell 20 per cent of its shares to the market for subscription, at a price to be determined.

Blue Power’s shares have rocketed since the mid-July disclosure of the split. Since then, the stock has climbed from $5.03 to as high as $14.40, but had fallen back to $8 on Wednesday, the day of the vote.

steven.jackson@gleanerjm.com