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Portland Private Equity to Acquire 22% Stake in PBS

30 June 2017

Portland Private Equity will acquire a 22% stake in Caribbean-based Xerox distributor Productive Business Solutions Limited (PBS). The total shares are valued at US$15m and represents the seventh investment for Portland’s Caribbean Fund II. 

(The Gleaner) Michael Lee-Chin’s Portland Private Equity, through funds under its control, is expected to take up a 22 per cent stake in document company Productive Business Solutions Limited (PBS) a regional Xerox distributor.

The shares, reserved for three Portland-related entities, value US$15m overall, and would represent a seventh investment for its Caribbean Fund II.

In one of the largest transactions to be executed via the stock market, PBS aims to raise up to US$41.5 million at maximum and US$37m at minimum through an offer of ordinary and preference stock with a coupon of 9.75 per cent on the Jamaica Stock Exchange and the Barbados Stock Exchange next week.

PBS is a member of the Musson Jamaica conglomerate, a privately held operation that has already listed two connected entities on the junior market of the JSE since 2012. The company operates in 15 countries, including its newest market Colombia.

Lead broker for the offer, NCB Capital Markets Limited, said it was a strategic move to entice Portland to enter the deal. Lee-Chin is also the chairman of NCB Financial Group, which owns NCB Capital Markets.

“There are some strategic issues as it relates to Portland. The company [PBS] thought it appropriate to have them as a part of this transaction,” said Herbert Hall, head of investments at NCB Capital. “Also, Portland looked at the offer independently and decided to make a big injection. So it validated our position as it being a very good investment,” he said.

The offer for PBS shares will run July 5-24. The company is seeking subscriptions for 39 million ordinary shares priced in hard currency at US$0.55 per share. The preference shares, 25.8 million redeemable units, are priced in Jamaican currency at $1.

In local currency terms, the offer is valued at around $5.3 billion.

Portland will get the opportunity to purchase 27.2 million reserved shares, which is six times the 4.5 million ordinary units earmarked for subscription by the general public.

However, all the preference shares will be available for public subscription.

The Musson-owned Facey Group holds 82 per cent of PBS, which will dilute to some 68.3 per cent if the offer is fully subscribed. Portland will become the second-largest shareholder with a 22.1 per cent stake.

NCB Capital values PBS at US$55 million, with a book value of some US$31.2 million.

“A company is listing at less than two times its book value. Yes, we think it is fairly priced. The valuation is modest and also takes into account the future prospects of what the company can do,” said Hall.

Another broker told the Financial Gleaner that on the surface, the listing offered good depth to the market.

“It’s a good offering of ordinary and preference shares for the market. This from a company which is the leading distributor of Xerox in the Western Hemisphere,” said Jason McPherson of Mayberry Investments Limited.

“Distributional relationships with Oracle, Cisco, et al, shows a company with good offerings and a large reach in the Caribbean, Latin and South America,” he said.

PBS will become one of the largest transactions on the JSE market, alongside Sagicor Real Estate X Fund Limited, raised $1.49 billion in October 2013, then some US$35 million in a preference share offer to finance its hotel acquisition in 2015. It was followed by Portland JSX Limited in 2016, which raised US$10 million. JMMB also raised over $7 billion from preference share offers earlier this year.

PBS will use US$17.45 million of the funds raised to retire debt, and another US$13.85 million as working capital.

Another US$8.7 million will buy back shares from IFC, the private-sector financing arm of the World Bank. The offer prospectus indicates that IFC currently holds at least 15.8 million PBS shares.

The document company made a loss last year of US$3.2 million, after making a profit of US$1.6 million in 2015. In the same period, revenues fell to US$171 million from $194.3 million.

PBS’ newest market, Colombia, essentially doubles its market capacity, Chairman Paul ‘PB’ Scott said in the prospectus.

PBS was founded in 2001 as a division of Musson to acquire the business and assets of Xerox Corporation in Jamaica. In a joint venture between Musson and Seprod Limited, PBS expanded to the Dominican Republic, Aruba and CuraÁao in 2004 through the acquisition of subsidiaries of Xerox Corporation in those countries. The companies were renamed PBS Dominicana, PBS Aruba and PBS CuraÁao.

In 2006, Facey Commodity Company Limited, a then 50 per cent associate company of Musson, acquired 51 per cent of Grupo Difoto, the exclusive distributor of Xerox products in Guatemala, El Salvador, Costa Rica and Panama, and a distributor for NCR and Sony Medical imaging in Guatemala.

That same year, Facey also acquired Springer Clarke Business Machines Limited, owner of Barbados Business Machines Limited, a technology distributor that represented Xerox, among other brands.