Recently listed company Dolla Financial Services Limited has expressed an interest in acquiring full control of Access Financial Services Limited (AFS) based on a letter addressed to its board of directors.

The August 11-dated letter addressed to AFS’s board of directors states that although the potential transaction is at the preliminary stage, Dolla believes that confidential explanatory discussions will allow both firms to formulate transaction terms that will be of mutual benefit to both companies’ shareholders. Both Dolla and AFS are microcredit companies listed on the Junior Market of the Jamaica Stock Exchange (JSE).

The letter proposed that both firms enter into a mutual non-disclosure agreement (NDA) that will limit information shared only to be used for evaluation of a potential transaction, disclosures to the JSE and market and allow for both parties to act in good faith. If the majority of the board is not opposed to Dolla’s expression of interest, both firms would formulate a mutually acceptable NDA. Dolla noted that it would not be disclosing its expression of interest as yet since it could cause irregularities in the trading of either company’s share prices which could ultimately affect the successful negotiation and erode value for both companies’ shareholders.

The JSE’s rule book defines a takeover as a transaction or series of transactions whereby a person (individual, group of individuals or company) acquires control over the assets of a company, either directly by becoming the owner of those assets or indirectly by obtaining control of the management of the company. Control is defined as an aggregate holding of 50 per cent or more of the voting rights of a company.

Dolla was listed on the Junior Market of the JSE on June 15 where it collected the net proceeds of $250 million. The company’s initial public offering garnered $4.76 billion in subscriptions which was well above the transaction value of $500 million. This resulted in Dolla having 14,981 shareholders. AFS was the first company to be listed on the Junior Market in October 2009 when it raised $100.69 million in fresh equity capital. AFS recently received approval from the Bank of Jamaica to operate as a microcredit institution under the 2021 Microcredit (Licence Form of Application) Rules, which is governed by the 2021 Microcredit Act.

Dolla currently enjoys a 10-year tax remission due to its recent listing while AFS is currently paying full income tax. The expression of interest letter mentioned that significant synergies can be realised by a business combination between both companies.

AFS’s loan and advances portfolio stood at $4.65 billion at the end of June with the company netting $432 million in interest income. However, the company’s net income shrunk 13 per cent to $77.56 million due to higher other operating expenses and credit loss provisions. Dolla’s loan book expanded to $1.05 billion at the end of June with the younger firm earning $298 million in interest income and $119 million in net profit, a quintupling of the $21 million earned in the prior period.

Dolla recently gained approval from its board of directors to raise a $1-billion bond to expand its loan book while AFS had a $2-billion bond offer last month to refinance debt on its book and provide itself with additional working capital. Dolla opened its Portmore location last week while AFS closed its Damark and Micro Credit Limited branches during its 2022 financial year and completed the consolidation of the former companies into AFS’s operations. AFS’s annual general meeting is set for September 8 at the Courtleigh Hotel.

No shareholder has held in aggregate more than 50 per cent of AFS since the company went public in 2009. AFS founder and executive chairman Marcus James was the largest shareholder in AFS up until 2014 when Proven Group Limited gained control after purchasing Mayberry West Indies Limited’s stake in the business. Proven sold 25 per cent of the company in an offer for sale in September 2019 which resulted in James’ Springhill Holdings Limited being the majority shareholder with 47.33 per cent interest in the company. However, a marriage dissolution/divorce lawsuit in the Broward County Circuit Courts with his estranged wife Julie Thompson-James puts his majority control in Springhill at possible risk. Florida is a 50/50 state where equitable distribution of assets takes place with Thompson-James filing a freezing order affidavit in the Supreme Court of Jamaica. First Rock Global Holdings Limited has 60 per cent interest in Dolla with Kadeen Mairs serving as CEO.