Pan-Jam, JP gain $1.3b from sale of Mavis Bank Cof­fee Fac­tory

Jamaica Gleaner - - BUSINESS - Steven.jack­son@glean­erjm.com and tameka.gor­don@glean­erjm.com

THE DEAL for Mavis Bank Cof­fee Fac­tory was val­ued north of $1.3 bil­lion, ac­cord­ing to newly re­leased fi­nan­cial re­ports.

Joint ven­ture part­ners Pan-Ja­maican In­vest­ment Trust and Ja­maica Pro­duc­ers Group sold the cof­fee op­er­a­tion at the end of sum­mer to Spe­cialty Cof­fee In­vest­ments Com­pany Lim­ited (SCI) with­out dis­clos­ing the terms of the trans­ac­tion.

Now their third-quar­ter re­ports show that Ja­maica Pro­duc­ers booked a gain of just un­der $650 mil­lion from the sale, while Pan-Jam made a slightly big­ger gain of $665 mil­lion – to­talling $1.315 bil­lion be­tween them.

Back in Septem­ber, Ja­maica Pro­duc­ers CEO Jef­frey Hall said the part­ners paid the Ja­maican govern­ment $243 mil­lion in to­tal to ac­quire Mavis Bank in 2011.

Pan-Jam, a prop­erty con­glom­er­ate and eq­uity in­vestor, more than dou­bled its earn­ings in the Septem­ber 2016 quar­ter as a re­sult of the sale of the cof­fee op­er­a­tion; while Ja­maica Pro­duc­ers grew profit five­fold, also helped by pro­ceeds from the sale of the cof­fee as­sets.

“Dur­ing the third quar­ter of 2016 the group com­pleted an ex­change of se­cu­ri­ties that re­sulted in the di­vest­ment of its share­hold­ing in Mavis Bank Cof­fee Fac­tory Lim­ited. This re­sulted in a gain on dis­posal in the quar­ter of ap­prox­i­mately $665 mil­lion. The year to date net profit in­cludes the im­pact of this gain as well as a gain of $185 mil­lion re­alised on the dis­posal of our in­ter­est in Hard­ware & Lum­ber dur­ing the first quar­ter,” said Pan-Jam chair­man and CEO Stephen Facey in a state­ment ac­com­pa­ny­ing the fi­nan­cial re­port.

The con­glom­er­ate made $1.3 bil­lion of net profit in the quar­ter, up 143 per cent $534 mil­lion a year ear­lier. Over nine months, Pan-Jam made $2.9 bil­lion, up from $1.9 bil­lion a year ear­lier. Some of the gains also re­lated to im­proved re­turns from its hold­ing in Sagi­cor Group.

Ja­maica Pro­duc­ers made $851 mil­lion in the Septem­ber quar­ter, up from $164 mil­lion. Profit over nine months ex­panded to $3.5 bil­lion, com­pared to $713 mil­lion at the same point in 2015.

VERY SUC­CESS­FUL

“This record profit re­sulted from a se­ries of spe­cific ini­tia­tives over sev­eral years in which the group has used an ac­qui­si­tion strat­egy to de­liver value for share­hold­ers in spe­cial­ity food and drink, while po­si­tion­ing the group as Ja­maica’s lead­ing private in­vestor in the lo­gis­tics busi­ness,” said Chair­man Charles John­ston in his state­ment to share­hold­ers of the com­pany.

“JP’s ac­qui­si­tion strat­egy has been very suc­cess­ful,” John­ston added. “In the case of MBCF, the gain recog­nised by JP in the third quar­ter, to­gether with the div­i­dends and other dis­tri­bu­tions re­ceived dur­ing the five years of own­er­ship by us, re­sulted in an av­er­age an­nual re­turn to JP of over 65 per cent.”

Ja­maica Pro­duc­ers’ out­size per­for­mance year to date is largely re­lated to its de­ci­sion to re­clas­sify port com­pany Kingston Wharves Lim­ited as a sub­sidiary. The tran­si­tion from an as­so­ciate com­pany in the sec­ond quar­ter of the year re­sulted in gains of $2.5 bil­lion.

In Septem­ber, SCI, a com­pany con­nected to Michael Lee-Chin, ac­quired the shares in MBCF from both JP Trop­i­cal Group Lim­ited, a sub­sidiary of Ja­maica Pro­duc­ers Group, and Scotts Pre­serves Lim­ited, a sub­sidiary of Pan-Jam, each of which owned 50 per cent of the com­pany.

The ac­qui­si­tion was Lee-Chin’s sec­ond cof­fee deal in the span of three years.

The di­rec­tors of SCI, ac­cord­ing to Com­pa­nies Of­fice records, in­clude LeeChin, and Mark McIn­tosh, the chief ex­ec­u­tive of­fi­cer of Wal­len­ford Cof­fee Com­pany. Lee-Chin ac­quired Wal­len­ford in 2013 through AIC In­ter­na­tional.

Mavis Bank was a loss-maker when it was ac­quired by the joint ven­ture part­ners in 2011 “but recorded op­er­at­ing prof­its in ev­ery year since the ac­qui­si­tion, with record prof­its recorded in the last fi­nan­cial year,” Ja­maica Pro­duc­ers said in Septem­ber when it con­firmed the sale to SCI.

The cof­fee fac­tory has been op­er­at­ing in the Blue Moun­tains for over 90 years and has long-stand­ing trad­ing re­la­tion­ships in Asia, Europe, and North Amer­ica. It also pro­duces the market-lead­ing Jablum brand of Ja­maica Blue Moun­tain Cof­fee.

In this July 2010 photo, work­ers at Mavis Bank Cof­fee Fac­tory spread cof­fee beans for dry­ing prior to roast­ing at the plant in ru­ral St An­drew.

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