Finsac processing bids for Ciboney
Finsac (Financial Sector Adjustment Company) Limited — the entity set up by the Government in 1997 to address the liquidity and solvency crisis which existed in the financial sector in the early 1990s — is processing bids for its 72.1411 per cent stake in Ciboney Group Limited which needs an injection of cash to avoid being delisted from the Jamaica Stock Exchange (JSE).
Finsac made its latest attempt to dispose of its stake in the former tourism company when it put out an advertisement in October 2021. Finsac had selected a preferred bidder and was finalising the decision in early June by way of relevant approvals as per government policy. However, the preferred bidder withdrew its bid at the end of June which left the company seeking a new buyer for the shares.
“We really cannot speak on behalf of the majority shareholders, but based on the unique see that I have, I’m aware that the majority shareholders have received offers and that has been the case for a little while. They are doing the necessary due diligence process. So, it will take some time for any final, firm decision to be made, one way or the other,” said Ciboney Chairman Errol Campbell at the company’s virtual annual general meeting (AGM) held on Wednesday with board members present in person at the Ministry of Finance.
A ministerial paper, which was tabled in the House of Representatives and released on Friday, September 9, indicated that the company carries shareholder’s net deficit of $2.7 million on balance sheet, which has therefore placed the entity in breach of JSE rules and put the company in danger of being delisted.
Ciboney’s cash position stood at $1.02 million at the end of its first quarter (June to August) with the company’s income tax recoverable of $2.63 million as its other asset. Campbell confirmed that Ciboney paid its payable of $700,000 owed to its auditor KPMG subsequent to the first quarter.
The company paid no director fees in its 2022 financial year and only paid $300,000 as consultancy fees to Sonado Limited for Q1 2021. Sonado Limited is connected to former Executive Director Geoffrey Messado and Jennifer Messado.
The company’s share price of $0.60 gives it a market capitalisation of $327.45 million. Ciboney’s second quarter ends this month with the results due by January 14. However, based on the company’s market cap, it will be required to pay an annual listing fee of $934,920 which becomes due on January 1.
When asked what’s expected to happen to the company if it runs out of cash, Campbell said, “As we have said repeatedly as the company here, the majority shareholders are looking to sell their shares and we expect that at some point when it is done, additional cash will be injected into the company. So, these matters will be addressed in that way. If that is done, then the matter of delisting won’t come into effect at all because the new majority shareholder would then look at injecting cash.”
Campbell told the Jamaica Observer in September that he would be seeking legal advice as to the way forward.
All resolutions at the meeting were approved including the appointment of new auditors Crichton Mullings & Associates after KPMG did not seek reappointment which delayed the AGM from its original October 14 date. KPMG was represented by Zaphnian Edwards-Newman at the AGM. JSE Chief Regulatory Officer Andrae Tulloch was present in the meeting after attending the 2021 AGM.
A reverse takeover of a similarly distressed company occurred this year where SSL Venture Capital Limited was taken over by MFS Acquisition Limited. SSL Capital has since been renamed MFS Capital Partners and executed a receivables financing transaction in its first quarter after being acquired. This was facilitated by due to related party arrangement which resulted in it getting a net amount of $28.22 million. MFS Capital also executed two memorandums of understanding to complete two strategic acquisitions recently.
Campbell indicated that five bids were received from the original October advertisement and that the preferred bidder gave no reason for withdrawing their bid except that the letter indicated that they no longer had further interest in acquiring Finsac’s stake. Finsac controls Trumpton Limited, Crown Eagle Life Insurance Company Limited and Crown Eagle Merchant Bank of Jamaica Limited. Errol Campbell and Tricia-Grant Mitchell were listed as the proxies by Finsac and the other shareholders for the AGM. Five proxies were received with about eight shareholders joining virtually.
“The bottom line is the majority shareholders are looking to sell their shares and as when that happens, then the new majority shareholder will start some trading activity within the company,” Campbell added.