Spur Tree Spices Jamaica Limited is now an associate company of GraceKennedy Limited (GK) with the conglomerate at the moment owning approximately 20.18 per cent of the spices company.

This was revealed on Wednesday when GK disclosed that its subsidiary GK Investments Limited had purchased 60 million ordinary shares on April 11 from two Spur Tree directors in equal volumes at $2.25 per share for a purchase price of $135 million. GK Investments had also purchased 11,839,518 shares on March 8 at $2.25 from a director for $26.64 million. GK Investments got its initial stake of 108,108,108 shares or 5.97 per cent stake when it converted a loan from Spur Tree into ordinary shares at its initial public offering (IPO).

Although the directors were not named in Wednesday’s Jamaica stock Exchange (JSE) disclosure, executive director and co-founder Harrinarine Mohan Jagnarine has been the only director that has sold substantial volumes of shares since March 2022. Spurtree Chief Executive Officer (CEO) Albert Bailey and non-executive director and co-founder Anand James are the only other directors who could have sold the 30 million shares to GK Investments, with neither selling shares since March 2022.

Jagnarine had a combined 522,951,387 shares at the end of 2023; Bailey had 260,473,912 shares and James had 115,000,000 shares as of December 2023. This purchase pushes GK to be the second-largest shareholder with an estimated 338,410,375 shares based on Spur Tree’s issues share count of 1,676,959,244 ordinary shares.

With this move, it is yet to be seen how the JSE will treat with Spur Tree’ status on the Junior Market. Spur Tree listed on January 14, 2022, and is currently benefiting from the 100 per cent tax remission for its first five years after listing before it switches to the 50 per cent tax remission for the subsequent five years.

Junior Market rules require that companies at all times comply with rule 501 (3) which dictates that each eligible company must not be an associate of a company listed on the Main Market. An associate is generally defined as a shareholding between 20 to 50 per cent where significant influence is demonstrated but not control. GK is listed on the Main Market of the JSE.

Derrimon Trading Company Limited is the only other Junior Market company, which is an associate of a Main Market company, in this case being Barita Investments Limited, which owns 20.26 per cent of Derrimon. Junior Market companies can be associates or subsidiaries of other Junior Market firms. Derrimon owns 65.02 per cent of Caribbean Flavours and Fragrances Limited, which it acquired in August 2014 and February 2017.

This transaction represents the latest mergers and acquisitions (M&A) transaction by GK which is currently on an aggressive M&A path. GK acquired 100 per cent of Scotia Insurance Caribbean Limited and Unibev Limited in 2023. GK doubled its interest in Catherine’s Peak Bottling Company Limited to 70 per cent in February 2023.

SpurTree’s preliminary unaudited 2023 numbers are available, but its audited numbers should be published by April 19 as per its last disclosure. Based on the interest GK acquired, it would record an estimated associate stake of $160.73 million based on Spur Tree’s December 2023 numbers. Spur Tree closed Thursday at $2.49 for a market capitalisation of $4.18 billion.

GK’s last purchase of a listed company was that of Key Insurance Company Limited where it acquired an initial 65 per cent in March 2020 and increased that stake to 73.5809 per cent in January 2021 following Key’s rights issue. GK spent $1.08 billion through the GK Financial Group Limited to acquire its interest in Key. GK sold 1,753,308 shares in Key to bring its stake down to 73.2674 per cent.

GK’s collected $858.44 million in December 2015 when it sold its 58.1 per cent stake in Hardware and Lumber Limited to Argyle Industries Inc for $18.50 per share.

GK currently owns a 8.39 per cent stake in Regency Petroleum Company Limited, a 7.32 per cent stake in JFP Limited and a 4.19 per cent stake in Indies Pharma Jamaica Limited. GK also has interests in 138 Student Living Limited and different listed preference shares.