Jamaica offloading Wallenford, 70% stake in Mavis Bank
Published:Wednesday | November 3, 2010 | 12:00 AM
Avia Collinder, Business Writer
Jamaica has tapped two coffee entities for divestment but is yet to finalise the terms on which the state assets will be sold off or otherwise into private ownership.
Jampro has been putting out feelers in the meantime in international markets for potential buyers for Wallenford Coffee Company Limited (WCCL) and Mavis Bank Coffee Factory Limited (MBCFL), while the Development Bank of Jamaica (DBJ) also said it has already received some unsolicited bids.
"The trans-actions are in the preliminary stage and the condi-tions for sale are being worked on to be included in the information memorandum, which is being compiled," said a dual statement from chairmen Albert Webb, representing Wallenford, and Peter Melhado, representing Mavis Bank.
The divestments are being handled by DBJ, which holds 70 per cent of the Mavis Bank coffee operation. Keble Munn and family owns the other 30 per cent. Wallenford is owned 100 per cent by the State.
No financial data was immediately for the Norman Grant-run Mavis Bank operation, but Wallenford is an over-leveraged, loss-making entity formed back in 2004 to take over the commercial operations of the Coffee Industry Board.
Wallenford's net losses have been consistent since 2005, broken only last year by a small J$7.24 million surplus, according to Ministry of Finance data.
Accumulated deficit of J$1.48 billion is partially offset by capital and reserves of J$438 million, but still leaves the company with negative equity of J$1.04 billion. Its long-term debts top J$1.6 billion, and is 8.4 times earnings before interest taxes, depreciation and amortisation.
Assets worth billions
Wallenford non-current assets are recorded at J$658 million (US$7.65 million), but the ministry data does not indicate the date of the last market valuation. Jampro, however, says the assets are worth US$20 million (J$1.7 billion).
The 70 per cent stake it holds in Mavis Bank fell into Government's hands in 2004 when the National Investment Bank of Jamaica (NIBJ) acquired the stakeholding "as part of a restructuring of debts owed by the company," said DBJ spokeswoman Claudette White.
NIBJ subsequently merged with the DBJ in September 2006.
DBJ said bids for the two assets would be invited after the information memorandum (IM) has been crafted.
"The proposals received will then be evaluated to select the most appropriate, based on the criteria which will be set out in the IM. Any indications of value that the GOJ presently has at hand will be utilised as a reference base," the agency said.
In September, teams from Jampro travelled to New York to discuss with potential investors properties to be divested and other investment opportunities, inclusive of Wallenford and MBCFL.
The pitch to investors, lead by Prime Minister Bruce Golding, "positioned Jamaica as an attractive business destination with potentially lucrative opportunities to the many high-level and influential investors and business-persons in attendance," Jampro says on its website.
The revenues generated by each coffee company is said by Jampro to have exceeded US$7 million annually in recent years.
In Wallenford's case, finance ministry data shows revenues climbing from US$8.5 million at yearend July 2008 to US$10 million in 2009; and US$11.9 million this year, though the latter two periods are still subject to audit.
"The Government of Jamaica is seeking investors who will undertake the finan-cing, development, operation and management of the WCCL," said the Jampro guide.
"The company has assets valued at over US$20 million and has revenues of over US$7 million per annum in recent years," it states.
WCCL, with properties and plant in Kingston, Clarendon, St Catherine, St Catherine, St Andrew, Portland and St Elizabeth, is also described as one of the largest licensed processors and exporters of Jamaica Blue Mountain Coffee.
"The company is vertically integrated and is involved in the purchasing, growing and pro-cessing components of the business process," states the investment guide.
The guide notes, however, that DBJ is in the preparatory stages of formulating the information memorandum which must be completed before bid proposals are accepted.
For Mavis Bank, investors were told that sales revenue over the last few years is described as ranging between US$8 million and US$11.6 million per annum.
The factory in which the Government has a beneficial interest is located in Mavis Bank, St Andrew, and is described as Jamaica's largest and only fully integrated Jamaica Blue Mountain coffee facility, whose products are sold under the Jablum brand.
Approximately 1.4 million pounds of green beans supplied by more than 6,000 farmers are processed at the factory annually, representing 30 per cent of Jamaica's Blue Mountain coffee output.
MBCF is located on 12 acres of land in Mavis Bank, St Andrew, in the foothills of the Blue Mountains. Close to one million pounds of beans are exported in barrels and bags under the MBCF trademark in the green bean form, with the remainder roasted and packed in vacuum bags under the Jablum brand.
The DBJ coffee divestment team state that the GOJ has received unsolicited expressions of interest regarding the privatisation of both entities.
"Upon receipt and evaluation of the publicly invited bids, negotiations will commence with the preferred bidder(s)," DBJ said.
The agency notes on its website that options for divestment include sale, lease, joint ventures; public share offers, management contracts and buyouts, sale to employees, private tenders; public auctions, and concessions - including Build-Own-Transfer (BOT) or Build-Own-Operate (BOO) models.
Offers will be evaluated on price, a comprehensive business plan, and development plan for the assets that incorporates technology to be deployed.