Sweet River Abattoir seeks $180m from public offer
SWEET River Abattoir & Supplies Company Ltd aims to raise up to $180 million in its initial public offer for working capital needs and to retire debt, according to its prospectus released Thursday.
It would become the first slaughterhouse listing on the Junior Market.
"The company is seeking to raise $180 million from the invitation and it proposes to utilise the net proceeds after payment of related expenses to reduce its bank loans, which are being utilised to complete the new facility," stated the prospectus. "The net proceeds will also be used to fund the installation of a solar energy generation system, as well as working capital support.
"The effect of these actions will significantly reduce finance and operating costs and that, together with the increased production capacity, will provide a sound foundation for the growth in profitability."
The company will offer 25.8 million units at $3.86 per share to the general public, which represents 26.5 per cent of the company, the prospectus indicated. An additional 20 million shares are reserved for clients, employees and so on. In total, the company will comprise 97.5 million units as issued share capital following the IPO.
The offer will run for two weeks from August 12 to 26. MoneyMasters Ltd and Victoria Mutual Wealth Management are co-lead brokers to the deal. Sweet River stated that it aims to list even if it fails to raise the full amount.
"Assuming that the company raises at least $50 million in the invitation, the company will make application to the Jamaica Stock Exchange (JSE) for the shares to be admitted to the Junior Market," noted the prospectus.
The company, chaired by Henry Graham, supplies both the local and tourist markets with cut pork. Its main customers include Grace Food Processors Limited, Caribbean Producers Jamaica Limited, and Hamilton's Smoke House (a subsidiary of Jamaica Broilers Group). The company holds 24 per cent market share, which equates to the third largest supplier of pork within the market, according to Sweet River data.
The company made $15.8 million net surplus after tax on $311 million in revenues for its year ending March 2014. That performance was slightly down from the net surplus of $16.9 million on $286 million in revenues earned in 2013, financials indicate.
Despite the fall in profits it still recorded a sizable return on equity of 24 per cent, compared with 35 per cent a year earlier. But the company holds a lot of debt since starting its expansion drive two years ago. Specifically, its total liabilities at $233 million are 3.5 times higher than its $65 million in equity in 2014. That debt-to-equity ratio was even higher in 2013 at 4.4 times, company statistics within the prospectus reveal.
The company expects to finish constructing its 12,000 sq ft state-of-the-art abattoir located in Westmoreland by next month in order to better supply the local and tourism demand at roughly 2.4 kilogrammes of pork eaten per person in 2012.
"On completion, the new abattoir will meet all international quality standards, which will facilitate the company's long anticipated entry into the pork exportation market. The new facility will allow Sweet River to expand its capacity from the current 120 pigs per day to between 250 and 300 pigs per day.
Additionally, the new abattoir will allow Sweet River to begin production of mutton. With these developments already in progress it truly is a great time to participate in Sweet River's growth," stated the prospectus.
Graham holds the largest number of shares at 14.9 million units. The listing will dilute his percentage ownership from 29.4 per cent to 15.3 per cent, according to the prospectus. Managing Director Valdence Gifford would see a dilution of his percentage ownership from 9.8 per cent to some 5.1 per cent.
The company was previously owned and operated as part of a GraceKennedy & Company Limited subsidiary for roughly 40 years. In its current form the company was incorporated in April 2009 and maintains all strategic relationships that existed prior to the acquisition, stated the prospectus.
Companies that listed on the Junior Market of the JSE prior to January 1, 2014 benefited from a 10-year concessionary tax regime. Since January, the new regime allows for five years of income tax relief.
"If the company is successful in listing, it will be entitled to the benefit of this new regime," stated the prospectus.