Citrus Growers negotiating partial sale of Juciful operation
Published:Friday | July 16, 2010 | 12:00 AM
Mark Titus, Business Reporter
The Jamaica Citrus Growers Association (JCGA) is in negotiations with a local investor from which it is seeking equity of J$500 million in exchange for a share in its company, Jamaica Citrus Growers Limited, the makers of Juciful fruit juices.
The Financial Gleaner understands that talks are well-advanced, but the parties are now haggling over just how much of the company the J$500 million will buy the Jamaican investor, who wants a 60 per cent controlling interest.
JCGA has made a counter-offer, which chairman John Thompson declined to disclose.
"The discussions are at a delicate stage, so we would not want to say who we are in discussion with, but we remain optimistic that we will have an agreement soon," Thompson told the Financial Gleaner on Wednesday.
The growers were forced into talks with potential investors after the Government issued an ultimatum for JCGA to restructure Jamaica Citrus/Juciful or be placed in receivership.
The citrus growers are banking on the capital from their prospective partner to ramp up production, which is now at 25 per cent of capacity.
"Our Juciful operation is running," Thompson said.
"We did not make any concentrate last year because there was an over supply, but we cannot operate at a larger capacity until the supply of fruits increase. This has been a problem from as way back as the eighties."
The association was granted a loan of J$50 million by the Government in 2006, but fell behind in its payment which forced the Government to extend the loan-repayment period from March 2007 to July 2009.
The citrus growers borrowed another J$70 million from the state-run Development Bank of Jamaica (DBJ) in 2007 and is once again in trouble with the creditor. Notwithstanding, it recently tried to burrow even more funds.
This time, Government said itwould consider additional debt financing, but only if JCGA made serious efforts to restructure the business.
"The situation was not tenable," Dr Christopher Tufton, minister of agriculture and fisheries told the Financial Gleaner earlier this week.
"Their debt-to-asset ratio is bad, as the debt is close to outweighing their assets. But the problem they have had is management, which is fundamental to any business," said Tufton.
"Where they have lost their way is that the growers, for some reason, have not been holding the management of the entity accountable for the assets that they own collectively."
JCGA's ownership in Jamaica Citrus Growers Limited is held by an entity called Citrus Growers Associate Limited, which has 3,274,986 shares of a total 3.275 million shares in issue, according to Companies Office records. The other 14 shares are held by 14 individuals, including Tomlinson who became a director in December 1995.
The company was incorporated in December 1949.
"Although having a membership of almost 5,000, the leadership of the association tends to have a lot of influence and control over the direction of the organisation, oftentimes with limited input from the general membership," Tufton said.
Following an examination of Citrus Growers' financial position, Government insisted that the company undergo major restructuring, including engaging an equity partner.
"This means that they still have the oranges, they still have a piece of the pie rather than running the risk of losing everything," Tufton said.
"This would mean using a private-sector model to do the business, so we loaned them J$60 million, brought in an interim manager as a condition of the loan, and used DBJ as a base to work with a tripartite group which includes themselves, the agriculture and finance ministries to restructure and package the product."
The cash from the deal would also be used for refinancing of the company's debts and reclassification of certain posts.
The company has about 100 permanent employees. It employs an additional 100 during crop season.
Thompson, who in 2008 placed Juciful's market share at 30 per cent, said sales have fallen substantially since then, but that he was unable to provide the current figures.