S parts maker Spur Tree aims to raise more than $ 335 million in equity at $ 1 per share, when its initial public offering hits the market at the end of the month.
Stock market investors are offered 335,391,848 shares of the company, over the period from December 29 to January 19, 2022.
Almost half of the funds raised by Spur Tree Spices Jamaica Limited will be used to liquidate an existing debt of $ 169.24 million. Of this amount, $ 156.75 million will go to GK Investments and $ 12.49 million will be used to reduce loans owed to directors.
Spur Tree CEO Albert Bailey said the company used the loan from GK to seal the acquisition of exotic goods.
“We bought exotics for a net price of around $ 75 million, but there was a debt component that put the gross price at almost $ 160 million,” Bailey said.
The spice company generated annual sales of more than $ 700 million in 2020, up 22% from 2019. More than 90% of total revenue comes from export sales, Bailey said.
Net income of $ 69.65 million at the end of 2020 was the highest in five years.
Exotic made a pre-tax profit of $ 12.38 million on revenue that exceeded $ 220 million for the nine months ending in September. Based on its annualized results, the newly acquired company is expected to add approximately $ 290-330 million to Spur Tree’s annual revenue for the year ending December 2021.
Spur Tree operates a 20,000 square foot factory at the Garmex industrial complex in Kingston. Another 15,000 square feet of space at Garmex is dedicated to the storage and warehousing of raw materials, Bailey said.
“We wanted to put ourselves in a position to be able to store adequate raw materials as a risk mitigation strategy,” he said, adding that seasonality and potential peaks and valleys in the materials supply chain Company premieres were an important consideration.
The company, through its acquisition of exotic products, also owns an ackee plant in Danvers Pen, St Thomas, which spans about 10,000 square feet, according to Bailey.
Ackee being a strategic product in high demand in export markets, he said, Spur Tree plans to streamline operations at Exotic, to double production over the next two years.
“Ownership of this ackee plant is critical to the growth of our products and our market,” added Bailey, noting that Exotic Products is one of nine ackee producers licensed by the Food and Drug Administration. from the United States to export to the difficult United States market.
Spur Tree produces a line of wet seasonings and sauces, canned fruit juices, ackee and callaloo, as well as seasonings and soups for the food service industry. Its exports are heavily concentrated in Florida and the eastern United States, and Bailey is keen to continue operating in the midwest and southern United States.
“There is a wide range of untapped markets where we regularly receive requests for our products. We are trying to strengthen the distribution channels that we already have and to go into these other areas of our primary market, ”he said.
Spur Tree also exports to the United Kingdom, Canada, the Cayman Islands, Costa Rica, Panama and Australia, as the United States is currently its main foreign market. Its Garmex plant needs to be streamlined to focus more on converting semi-processed raw materials into finished products, so that production meets anticipated demand for Spur Tree products.
Of the 335.39 million shares offered in the IPO, representing 20% of the company, 177.28 million are intended for the general public, while the rest will be distributed among various interests, including 40 million for farmers, $ 10 million for Spur Tree staff, and $ 108.1 million for GK Capital, which is Spur Tree’s financial advisor and principal broker for the offering. Sagicor Investments acts as a co-broker.
Spur Tree plans to list nearly 1.677 billion shares on the junior market of the Jamaica Stock Exchange after the IPO is successfully completed. The top three owners after the IPO are expected to be Harrinarine Jagnarine, 34.32%; Albert Bailey, 16.76%; and Anand James, 7.15 percent.