With an aim to acquire Micro-Financing Solutions (MFS) Limited by the end of 2023, MFS Capital Partners Limited is looking to raise $300 million as it seeks to establish a core business focus.

This was revealed in the company’s 2023 annual report which noted that the capital raised would fund acquisitions and working capital. MFS Capital’s 2023 audited notes stated that the company had entered into a memorandum of understanding on July 15 with a micro-financing entity to acquire 100 per cent of the ordinary shares of the company for a price to be determined.

“The strategy of MFS Capital Partners will shift to focus primarily on private equity and private credit deals in both local and international markets. Furthermore, the company will assess [the] viability of expanding its business into the investment banking and real estate sectors,” stated the strategy and outlook section.

MFS Acquisition acquired 79.08 per cent or 316,329,891 ordinary shares of SSL Venture Capital Limited (SSLVC) in May 2022 for $0.0948 per share. SSLVC was renamed MFS Capital in August 2022.

Since the effective close of the transaction in July 2022, MFS’ position decreased to 219,092,955 ordinary shares by September 2022 and to 214,092,955 shares or 53.52 per cent as of June 2023.

MFS Capital’s primary initiative going forward is to complete the acquisition of Micro-Financing Solutions which will significantly advance its financial position. The annual report noted that while it has completed its due diligence, it awaits regulatory approval to conclude the acquisition.

Micro-Financing Solutions currently operates in the private credit, remittances, FX trading and bill payment space. It also has a 28 per cent equity stake in Capital Solutions Limited and has the right to purchase up to 75 per cent of the share capital within the next five years.

Micro-Financing Solutions is run by director and Chief Executive Officer (CEO) Tamar Webley with other board and management team members including Dino Hinds, Robert Barnes and David Weir. Hinds is the majority shareholder of MFS Acquisition with Webley listed as a shareholder and director according to Companies Office of Jamaica records. Hinds and Barnes are listed as CEO and chief operating officer of MFS Capital Partners.

MFS Capital currently earns income from private credit transactions including receivables financing and consulting services which brought in $22.31 million during the 2023 financial year ended June 30.

MFS Capital as a standalone entity earned no revenue during the year but generated $30.27 million in other income which included related party balance write-offs. After expenses and taxes, MFS Capital’s net profit grew 62 per cent to $8.47 million.

The consolidated financials, which include its equity interests in Bar Central Limited and Muse 360 Integrated Limited, saw other income dip in half to $32.90 million due to a reduction in payable write-offs. Net profit attributable to shareholders declined 32 per cent to $8.79 million.

While this is an improvement in the overall financial position, the group has a deficit attributable to shareholders of $26.82 million while the company has equity of $2.12 million. The bulk of MFS Capital’s current funding is currently derived from related party financing which originates from a company listed as MFS Group Limited to the tune of a $47.07 million liability.

MFS Capital’s 2023 audit received a qualified audit opinion from its auditors Baker Tilly Strachan Lafayette. This qualified opinion was related to the accumulated deficit and current liabilities exceeding current assets. It noted that the company remains dependent on their parent company MFS Acquisition for continued financial support.

Although there has been no update on what form the capital raise would take, it would either be debt or equity. With share capital of $111.81 million, it would be limited to raising only $388.12 million as per JSE Junior Market rules. Although no date has been set for the company’s annual general meeting (AGM), only ordinary resolutions are currently included on the notice of AGM.

Following the resignation of Kamille Martin as head of finance on March 31, MFS Capital appointed Dr Kesha Christie as its chief financial officer on June 1. Also, Herbert Hall was appointed MFS Capital’s company mentor since it still remains on the Junior Market.

MFS’s stock price closed Tuesday at $2.11, which leaves it down 29 per cent year to date with a market capitalisation of $844 million.