Business

IPO in Lumber Depot to open within two weeks

BY DURRANT PATE
Observer business writer

Friday, October 25, 2019

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Mayberry Investments Limited has announced that the initial public offer (IPO) of shares in Lumber Depot, a subsidiary of the Blue Power Group, will open within the next two weeks.


The company is seeking to raise between $350 and $500 million dollars, which will be used to recapitalise the company, located at 17c Gordon Town Road, St Andrew, which is at the heart of Jamaica's “university town” serving the communities of the St Andrew Hills.


The indicative sale price is between $1.00 and $2.20 per share.


The announcements were made at yesterday's Mayberry Investor's Briefing for Lumber Depot at the AC Hotel, Lady Musgrave Road, Kingston.


The principals of Mayberry and Lumber Depot, who were the main speakers at the briefing, were cautious in not giving out much detail about the IPO.


They say this is due to the fact that the prospectus, which will accompany the IPO, is not out as yet, citing certain Financial Services Commission regulations, which prevent them from doing so.

SHARES TO BE LISTED ON JUNIOR MARKET


The shares in the IPO would be listed on the Junior Market of the Jamaica Stock Exchange. In giving an overview of the company, Chairman Jeffrey Hall pointed out that “Lumber Depot has been earning solid growth in revenues and profits with approximately $1.1 billion in hardware and building materials sales in 2019, earning $74 million in profits.”


He said “the IPO will secure solid a cash position for Lumber Depot, which will be well-positioned for competitive procurement and growth initiatives,” noting that the junior market listing creates the possibility for raising additional growth capital with an attractive tax status.


The Lumber Depot chairman pointed to certain developments in the market, which makes the business environment favourable to the company, such as the reduced interest rates and reduced government debt, which is now driving construction growth, which is at 3.4 per cent.


This is in addition to the government policy regarding lower mortgages by the National Housing Trust and reduced transfer tax and stamp duty to drive land sales and housing starts.

'WAIT UNTIL THE PROSPECTUS IS OUT'


Question after question about the IPO by the Caribbean Business Report (CBR) were met with the response, “wait until the prospectus is out”.


Among the questions raised were whether the proceeds of the IPO would be used to pay down debt, expand the business or to pay the major shareholders for the portion of the shares they are selling and why not float an IPO to raise capital jointly for Lumber Depot and its soap manufacturing subsidiary,
The CBR also enquired about the amount of equity the major shareholders are selling to the public in this IPO but didn't get a definitive answer. However, director of investment banking at Mayberry Investments, Tania Waldron-Gooden, in her response, indicated that the approximate percentage of issued share capital in the IPO would be in the order of 20 per cent to 40 per cent of the company's total share equity.
This is as a result of $100 million to $200 million in newly issued shares and approximately $150 million to $300 million of existing shares being sold by the primary shareholders in the company, which has been in the hardware and lumber business for the past 20 years. The basis of allotment of shares will be on a first come, first serve basis.


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