Proven buys into Bajan foods firm for $3b in 2021 M&A roll-out
Listed Jamaican investment firm Proven Investments Limited says its announced US$21.4-million ($3 billion) acquisition of a majority stake in the Barbados-based food processing company, Roberts Manufacturing, is a further reflection of the more aggressive mergers and acquisitions (M&A) mode it is adopting for the new year and beyond. Roberts is said to operate from a 21-acre industrial complex, consisting of large manufacturing plants, producing a variety of margarines, shortening, soyabean oils and animal feed products which are distributed to over 15 markets regionally and internationally.
Robert Manufacturing has US$26 million (approximately $3.7 billion) in net assets, based on its latest financials.
Upon completion of the purchase, which is subject to regulatory approval, the deal should increase Proven’s net assets, now at about US$130 million, or some $18.5 billion, by 20 per cent to reach US$156 million, or more than $22 billion. That is before additional funds are added to Proven’s capital base from the additional public offer now on the market with a January 29 closing date.
The deal would also grow Proven’s normalised profits by about the same 20 per cent. That’s based on Roberts’ average share of profit at roughly US$2 million and Proven’s normalised profit of US$10 million.
Proven CEO and co-founder Christopher Williams would not comment on the pricing of the deal beyond the January 5 market disclosure, and also declined to comment on the expected profits impact.
A source familiar with the deal told the Financial Gleaner that Proven is expected to try to grow profit towards the US$7-million range in the long term. Williams would not comment on that projection.
“This purchase allows us to enter the real sector. It is our third entry in the real sector after Knutsford Express and Dream Entertainment,” Williams told the Financial Gleaner on Wednesday. Its previous holdings are mainly in financial firms.
Williams has described the real sector as an area set for tremendous growth in the aftermath of the ongoing COVID-19 pandemic. That’s due to a heightened demand for consumer goods and services. The Proven CEO says the company continues to hunt deals. He explained that businesses are more willing to release tightly held assets in favour of cash, as a means of weathering the pandemic.
“The pandemic has opened up a number of liquidity events and those are the events that drive private equity transactions, because people might want to exit,” he added.
In the market disclosure, Proven said: “The proposed acquisition is aligned with its strategy to grow through acquisition in the real sector throughout the Caribbean and Latin American regions, with a view to create value to its shareholders.”
Proven acquired its 50.5 per cent stake in Roberts from Massy Properties, part of the Trinidad-based Massy conglomerate. The other shareholder, Ansa McAl, continues to hold its 49.5 per cent stake.
The management of Roberts Manufacturing remains unchanged, and Williams said Ansa McAl will be a strong partner that knows the real sector well. Proven mainly focuses on taking stakes in financial sector businesses across the region.
Its financial services acquisitions include a 20 per cent stakes in JMMB Group Limited; 75 per cent ownership of BOSLIL Bank Limited in St Lucia, with offices in Panama and Uruguay; 100 per cent of International Financial Planning in Cayman; 25 per cent of Access Financial Services Limited in Jamaica; and full ownership Proven Wealth Limited, which recently merged with Proven Fund Management Limited. Proven also holds real estate assets through Proven Real Estate Investment Trust.
Among its non-financial holdings is 20 per cent of entertainment promoter Dream Entertainment.
The most recent acquisition is positioned as a profitable deepening of Proven’s foray into the real sector. Roberts’ net assets stood at US$26 million in September 2020, up from US$23 million in 2019 and US$25.7 million in 2018, based on Massy financials, which disaggregates the performance of Roberts. Profit at Roberts dipped to US$2.9 million in 2020 from US$3.8 million in 2019 and US$3.6 million in 2018, according to Massy financials originally expressed in Trinidadian currency.
The share of profit for Massy in 2020 at 50.5 per cent equated to US$1.46 million, down from US$1.9 million in 2019 and US$1.8 million in 2018. The economic effects of the pandemic in Barbados followed on its economic woes over the last two years, which led to a rating downgrade.
Proven made US$32.2 million net profit for its March 2020 financial year end, US$10 million in 2019 and US$9.5 million in 2018. The jump in profit was due to it selling down its stake in Access Financial for a sizable profit.