PRODUCTIVE Business Solutions Limited (PBS) is aiming to raise US$11 million ($1.69 billion) through the issuance of two classes of perpetual cumulative redeemable preference shares, subject to the company upsizing the offer to US$17 million ($2.61 billion).
The enterprise technology firm is a Barbadian international business company with more than 2,200 employees and is listed on the International Securities Market of the Barbadian Stock Exchange (BSE) and on the United States dollar (USD) equities market of the Jamaica Stock Exchange (JSE). PBS operates in 19 countries, with its regional headquarters in Guatemala, and represents more than 100 global technology brands such as Apple, Dell, Google and Microsoft.
In this offer the company is planning to issue an initial one million USD preference shares at US$10 per share and 150,000 Jamaican-dollar (JMD) preference shares at $1,000 per share. If the offer is upsized will see an additional 500,000 USD preference shares and 150,000 JMD preference shares. 700,000 USD preference shares are reserved for reserved share applicants, described as pension funds, collective investment schemes, and other discretionary funds and portfolios for which JMMB Fund Managers Limited is the investment manager. The remaining shares are available for the general public. Each USD application requires a minimum subscription of 50 preference shares (US$500) with increments in 10 units (US$100) while the JMD applications require a minimum of 100 preference shares ($100,000) with increments in 50 units ($50,000).
The USD preference share rate is fixed at 9.25 per cent while the JMD preference share rate is fixed at 10.50 per cent. However, at the company's special meeting held on February 10, the original USD rate was nine per cent while the JMD rate was 10 per cent. Since that meeting the Bank of Jamaica has hiked its policy rate from 2.50 per cent to 5.50 per cent at the end of June while the United States Federal Reserve moved its fed rate from 0.25 to 2.50 per cent at the end of July. As a result this means PBS has more than 3.5 million USD preference shares and 4.7 million JMD preference shares it can issue in subsequent offers.
"The business is growing a lot and [there is] very significant growth in our core metrics. As a result of that performance we need to fund that continued growth of the business. The reason we want more capital is because we want to fund the expansion of the business," said Musson Chief Investment Officer Nicholas Scott ahead of the special meeting held on February 10.
The prospectus states that the funds will be used to fund the company's strategic growth objectives which include acquisitions and expansion into new territories. PBS expects to spend $100 – $157.50 million in fees relating to the offer, including to its Barbadian listing sponsor ListAssist Services (Barbados) Ltd. The Musson Group and Facey Group Limited collectively own 69.80 per cent of PBS.
"At this point where we are, I think we have two or three opportunities for this year. If they happen they will significantly change the configuration of the company. My job is to make them happen, along with all the stakeholders mentioned. We think we have a formidable platform to integrate entities and that's why we feel very optimistic that this will change the configuration of the company. It's very important for us that we're very constant and I believe that our parent entity, Musson, has unique skills on mergers and acquisitions," said PBS Chief Executive Officer Pedro Paris in an interview with the Jamaican Observer recently.
The USD and JMD preference shares are perpetual, which means they can exist in continuity unless the call option is used by PBS to redeem them from investors. The first call date would be the last day (December 31) of the financial year before the 15th anniversary (2037), and on the last business day of the financial year every three years after. The redemption price will be the current market price or issue price — depending on which is higher at the time the call option is exercised.
PBS issued a $2.58-billion (US$16.28-million) JMD preference share in August 2017 at $100 which is set to mature in June 2024 and pays semi-annual dividends. The rate is fixed at 9.75 per cent with the company paying $9.75 per share or $251.55 million in dividends for 2021. The shares are listed on the JSE. Since preference shares are a tax-deductible expense in Jamaica, Jamaican residents would not be subject to withholding taxes on their payments. PBS declared its third ordinary dividend since listing of US$0.0109 or US$2 million in 2021.
Following the company's successful acquisition of PBS Technology Group Limited in September 2021, PBS is projecting that it will earn US$300 million in revenue and earn $10,000 in consolidated net profit from continuing operations. It also expects its debt-to-equity ratio to fall from 1.70 in 2021 to 1.10 by the end of 2022. PBS earned US$224 million in revenue for 2021 and consolidated net profit of US$5.70 million. A total of 41 per cent of its 2021 revenue was in USD or was US$ pegged, nine per cent in JMD, and 50 per cent in other currencies. A total of 54 per cent of revenue was from outright equipment sales and the remainder from recurring services.
Its asset base was US$336.96 million with its shareholders' equity at US$84.21 million. Its stock price is down nine per cent year to date on the JSE to US$1, which leaves it with a market capitalisation of US$186.21 million. Its annual general meeting is set to be held on September 23 at 58 Half-Way-Tree Road and online at 10 am.
JMMB Securities Limited is the lead broker and arranger for the offer with Barita Investments Limited as a selling agent. JMMB clients can apply on Moneyline while everyone else can apply on baritaboss.com. The offer will open on August 12 and will close on September 9. The offer needs to be subscribed by a minimum of US$5 million ($768.55 million) in order for it to be successful.
"The growth of enterprise technology globally is an enduring, long-term trend. The [novel coronavirus] pandemic has significantly accelerated digital adoption and the pace of technology investments by business and governments. As the largest enterprise technology company in the region, PBS is at the centre of this development. As the only technology company listed on the Main Market of the JSE, PBS offers investors an opportunity to participate in the growth of technology in the Caribbean and Central America," said Paul B Scott in the chairman's letter of the prospectus.
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