US$39.5M Wallenford Coffee Company deal
The Jamaica Government-owned Wallenford Coffee Company (WCC) has been divested to Michael Lee-Chin’s AIC International Investments Limited (AIIL) in a deal worth US$39.5 million or about J$4.04 billion.
Sale of the company was announced today by Milverton Reynolds, Managing Director of the Development Bank of Jamaica (DBJ).
He said the Government executed a memorandum of understanding with AIIL on August 29, according to a release from the DBJ.
The deal calls for an initial payment of US$16 million (J$1.6 billion) to the Government, with the purchaser injecting an additional US$23.5 million (J$2.35 billion) in the development and expansion of WCC over the next four years.
AIIL assumed control of the WCC operations on September 11.
Closing of the transaction is expected to take place within the next six months, the DBJ said.
“The objective of AIIL’s four-year development plan is to establish the WCC as an efficient and profitable coffee company producing the highest quality green bean products as well as innovative new value added products,” the release said.
“In support of this objective, the purchasers will focus on improving the quality of green beans and strengthening the Wallenford brand by diversifying the product offerings in existing and new markets,” it added.
The development plan also includes the resuscitation of established farms, upgrading of equipment and renovation of buildings and facilities, while increasing the acreage of coffee and extension services to coffee farmers.
Speaking about the transaction, Lee-Chin said “I am truly excited and energised by the prospects for Jamaican coffee. I look forward to doing my part to ensure that the Jamaica Blue Mountain brand, Jamaican coffee in general and, most importantly, Jamaica's hardworking coffee farmers, receive maximum financial benefit from proper stewardship of our uniquely Jamaican, yet globally recognised coffee.”
Reynolds expressed satisfaction at the privatisation, saying: “We are confident that the Portland group will bring the required skills and resources that will transform WCC into a world-class coffee company. This will relieve the Government of the obligation of providing financial support to the operations. The divestment is also important for the industry as a whole as the purchaser plans to invest in increasing the acreages under cultivation and will continue to provide extension services to coffee farmers.”
WCC was wholly owned by the Jamaican Government through the Accountant General.
It is a vertically integrated entity involved in the growing, purchasing and processing of cherry coffee into green beans. WCC recently expanded into a complete line of roasted beans and ground products for the local and international consumer markets.
Owner of the 250-year-old Wallenford brand, WCC has access to more than 5,000 acres of Blue Mountain coffee land and has the capacity to process over nine million pounds of coffee at its facilities.
As at February 28, 2013, WCC had accumulated losses of J$2.36 billion (US$23.6 million) since 2004. It had net assets of J$67.75 million (US$0.68 million).
The company suffered from limited funding over the years and the plant’s processing capacity has been extensively under-utilised.
The divestment of the WCC will mark the departure of the Government from commercial coffee operations, having previously divested the Mavis Bank Coffee Company in October 2011, the DBJ said.
“The Government will now move to focus its efforts on regulating the industry through the Coffee Industry Board, encourage general development and expansion of the industry and aggressively protect the Jamaica Blue Mountain Coffee brand,” the release said.