Spur Tree aiming for $335m of equity capital through IPO
S pice maker Spur Tree is aiming to raise over $335 million of equity capital at $1 per share, when its initial public offering hits the market at month-end.
Stock market investors are being offered 335,391,848 shares in the company, over the period December 29 to January 19, 2022.
Just about half of the funds raised by Spur Tree Spices Jamaica Limited will be used to liquidate existing debt of $169.24 million. Of that amount, $156.75 million will go to GK Investments, and $12.49 million will go towards reducing loans owed to directors.
Spur Tree CEO Albert Bailey says the company used the GK loan to seal the acquisition of Exotic Products.
“We bought Exotic Products for a net price of about $75 million, but there was a debt component that put the gross price at close to $160 million,” Bailey said.
The spice company generated annual sales of more than $700 million in 2020, up 22 per cent relative to 2019. Over 90 per cent of total revenues come from export sales, Bailey said.
Net income of $69.65 million at the end of 2020 was the highest in five years.
Exotic made pretax profit of $12.38 million on sales revenue that topped $220 million over nine months ending September. Based on its annualised results, the newly acquired business is likely to add around $290 million-$330 million to Spur Tree’s annual revenue for year ending December 2021.
Spur Tree operates a 20,000-square-foot factory at the Garmex industrial complex in Kingston. Another 15,000 square feet of space at Garmex is dedicated to raw material storage and warehousing, Bailey said.
“We wanted to put ourselves in a position to be able to have adequate raw material stored as a risk-mitigation strategy,” he said, adding that the seasonality and potential peaks and troughs of the company’s raw material supply chain was a big consideration.
The company, through its acquisition of Exotic Products, also holds an ackee factory in Danvers Pen, St Thomas, which spans about 10,000 square feet, according to Bailey.
With ackee being a highly demanded strategic product in export markets, he said, Spur Tree plans to rationalise the operations at Exotic, to double production over the next two years.
“Ownership of this ackee factory is critical in terms of our product and market growth,” Bailey added, noting that Exotic Products is one of only nine ackee producers authorised by the US Food and Drug Administration to export to the tough United States market.
Spur Tree produces a range of wet seasonings and sauces, juice drinks, canned ackee and callaloo, and seasonings and soups for the food service industry. Its exports are highly concentrated in Florida and the eastern end of the United States, and Bailey wants to go after more business in the mid-western and southern US.
“There is a wide span of untapped market where we get requests for our products regularly. We are moving to strengthen the distribution channels that we already have, and push into those other areas in our primary market,” he said.
Spur Tree also exports to the United Kingdom, Canada, Cayman Islands, Costa Rica, Panama and Australia, bus the US is currently its main foreign market. Its factory at Garmex is to be rationalised for greater concentration on converting semi-processed raw material to finished goods, in order for output to keep up with the anticipated demand for Spur Tree products.
Of the 335.39 million shares on offer under the IPO, encompassing 20 per cent of the company, 177.28 million are for subscription by the general public, while the rest will be split among different interests, inclusive of 40 million for farmers, 10 million for Spur Tree staff, and 108.1 million for GK Capital, which is Spur Tree’s financial adviser and principal broker for the offer. Sagicor Investments is acting as co-broker.
Spur Tree plans to list nearly 1.677 billion shares on the junior market of the Jamaica Stock Exchange, once the IPO closes successfully. The top three owners after the IPO are expected to be Harrinarine Jagnarine, 34.32 per cent; Albert Bailey, 16.76 per cent; and Anand James, 7.15 per cent.