Investors demanded Paramount 6 times over
INVESTORS applied for more than six times the amount of shares that were offered by Paramount Trading.
The industrial chemical manufacturer and distributor successfully rose $75 million for a 20 per cent stake in the company by the time the offer opened on Wednesday morning, but closer to $480 million in bids came in.
Applicants, including those who applied for reserved shares, won't necessarily get the full amount they want, given that the shares being offered are far less than the amount applied for.
They will be advised of the basis of allotment within three business days (by Monday) in accordance with the Junior Market Rules.
The shares, which are to be listed on the Jamaica Stock Exchange (JSE) Junior Market, were priced at $2.43 for each, which priced the overall value of the company at $374 million, or 2.5 times the capital base of the company.
The valuation is also 4.5 times the chemical distributor's $83 million pre-tax profit for the 12 months to October 31.
Paramount is proposing to pay dividends of "not less than 25 per cent of net profits available for distribution".
Given that after listing, the company will be exempt from income tax; its net profit could look like 54 cents a share next year, if it sees flat performance.
That could translate to a 13-cents-a-share annual dividend payment.
However, the proposed dividend policy also says that the payment would be determined after the amount for reinvestment in the company is worked out.
The initial public offering (IPO) was undertaken to increase its manufacturing and blending capacity as well as expand its line of construction products.
Currently, the business generates almost 90 per cent of its revenue ($614 million during the 12 months to May 31) from chemical raw materials, food additives and related products.
Chemicals also accounted for 87 per cent of its $200-million gross profit for 2012.
But having started distributing specialists products to the construction sector two years ago, Paramount is on the verge of establishing itself as a regional manufacturer and distributor of France-based SIKA's admixture and construction products, such as epoxies for floors and waterproofing for roofs.
The raised funds that are also to be used to improve the existing plant and processes, establish complementary facilities, and pay the lead broker, Mayberry Investments, for its financial advisory services.
This is the 10th company that Mayberry has brought to the JSE Junior Market.