Tropical Battery hoping to raise $325 million from IPO which opens next week

Business

Tropical Battery hoping to raise $325 million from IPO which opens next week

Selling shareholders to receive $162.5 million

BY DURRANT PATE
Observer Business Writer

Wednesday, September 16, 2020

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Topical Battery Company is hoping to raise $325 million from its initial public offering (IPO), which opens on Tuesday, September 22.

The one dollar per share IPO closes just over a week later on September 30 with NCB Capital Markets acting as lead broker.

Three hundred and twenty five million shares will be on offer, where 137.5 million will be made available for purchase by the general public and 187.5 million being reserved for sale by employees, industry partners, Tropical Battery Pension Fund and NCB Capital Markets.

Of the total block of shares being sold in the IPO, 162.5 million, representing 25 per cent share equity in the company, is being sold by existing shareholders. If the IPO is successful, the remaining 75 per cent of Tropical Battery will be retained by Dai Diverze (Jamaica) Limited.

All of the issued shares in Dai Diverze (Jamaica) Limited are held by Diverze Assets Inc, a company incorporated under the laws of St Lucia. Its shareholders are Portland Private Equity (holding 40 per cent of the issued capital) and Mark Melville, Alexander Melville and Daniel Melville (collectively holding 60 per cent of the issued capital).

SALE PROCEEDS

Based on the prospectus, “the proceeds of sale of the shares being sold by the selling shareholders, $162.5 million would accrue to their benefit and not to the company. The company intends to use the balance of the proceeds of the IPO of $162.5 million for expansion and working capital purposes including, but not limited to, the following:

1. New product lines, that is, start-stop technology, lithium ion batteries and other renewable storage products, tyres, lubricants, etc.

2. Expansion and renovation of retail stores.

3. Expansion of parking at our number one retail store at Grove Road, St Andrew.

4. Completion of build out of and relocating to our new warehouse, head office and retail store at Ferry, which is located on the busiest motorway in Jamaica.

5. Acquire and install information technology systems which will give us greater efficiency and improve our customer experience.

6. Expansion of our mobile/ home delivery fleet of vehicles.

The company made revenue of $1.74 billion in 2019 compared to $1.47 billion the year before. Profit in 2019 was $62.9 million compared to $30.98 million in 2018.

In his letter to investors, which was included in the prospectus, Managing Director Alexander Melville said the IPO presents an exciting new investment opportunity that allows investors to own a piece of one of Jamaica's oldest and most trusted household brand.

He noted that if the company is admitted to listing on the Junior Market of the Jamaica Stock Exchange, it will take advantage of the special concessionary tax regime that is currently in place.

“So 100 per cent of profits will be exempted from taxation for the initial five -year period. For the remaining five-year period, 50 per cent of profits are exempted from taxation,” Alexander Meville said.

FUTURE GROWTH

According to the prospectus, “the future growth for the company will come primarily from the addition of new product lines, ie Renewable Energy Batteries, Oils and Lubricants, Tyres, etc.), organic growth of existing products, expansion and the renovation of our retail stores.”

The prospectus details the company's thrust to strategically leverage information technology (IT) in all aspects of our business. To achieve this, Tropical Battery is currently conducting an overall IT transformation.

As part of this IT transformation, the battery company has developed a roadmap, which outlines several innovative projects, aimed to not only enhance its internal operations but also its products, services and customer's experiences.


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