The proposed spin-off of the manufacturing arm of Jamaican Teas Limited, or JTL, should happen in time for listing on the main market of the Jamaica Stock Exchange by year end, Chairman John Jackson said Wednesday.
The spin-off company, to be called Caribbean Dreams Foods Limited, will sell shares via an initial public offering, or IPO. The new company’s name reflects JTL’ proprietary tea brand Caribbean Dreams. It also manufactures Tetley teas under license.
Jamaican Teas’ board has not yet settled on how many Caribbean Dreams shares will be put on the market and what sort of compensation, if any, existing shareholders of JTL may get as a result of this spin-off. The company mainly manufactures teas, but it also operates a real estate arm and an investment business, the latter of which was also listed on the JSE main market in 2019.
Jackson told shareholders at a specially convened extraordinary general meeting that the process of spinning off the manufacturing arm of JTL would not bring wholesale operational changes but rather, offer more options to investors.
“Nothing will actually change; it’s going to be a seamless transition from the existing operations, Jamaican Teas, to this new company. It is a matter of quantifying the values of the assets to be transferred over, and that will determine the basis for the value of the shares,” Jackson told shareholders at the 15-minute-long meeting.
Shareholders were asked to vote on three resolutions – the first, dealing with changes to the company’s articles of association to allow for the hosting of virtual meetings; the second, a special resolution that called on shareholders to authorize the spin-off of JTL manufacturing business; and the third dealt with voting and resolutions – all of which were approved.
Regarding the rationale for the spin-off company, Jackson said over time the JTL board considered the various benefits of creating a subsidiary for the manufacturing operations “so as to, among other things, provide investors with the possibility of participating directly in the ownership” of it.
“In terms of going forward, it is the intention that Caribbean Dreams Foods Limited will be listed on the main market of the Jamaica Stock Exchange. I suspect that looks like the first quarter of financial year 2022, all things being equal,” Jackson said. JTL’ financial year ends in September, which means its first quarter for FY 2022 would end in December 2021.
There has been a buzz around JTL's shares since the end of summer, the board having decided on the spin-off at its September 14 meeting. About 29 million units of JTL stocks traded in the past four weeks, with volumes exceeding one million shares on 10 trading days in the period, and as much as 4.7 million shares trading on October 1. Jackson says the JTL board is not unmindful of the recent activity.
“The board will take all those factors into consideration in determining how the share structure will be done and what pricing will pertain to those shares,” he said.
JTL Chief Financial Officer Cameron Burnett says the transfer of the business to Caribbean Dreams Foods can take place before Christmas, “but what happens subsequently to the ownership of that company has not yet been decided,” he added.
After the EGM, the company proceeded with its long-delayed annual general meeting. Strictures under the Disaster Risk Management Act put pay to efforts aimed at hosting a meeting earlier in the year. Both CEO John Mahfood and CFO Burnett gave short reports, with highlights from the September 2020 annual report.
The annual loss of $70 million made by the company in FY 2020 was caused by the drag on profits wrought by JTL involvement in its listed investment subsidiary, QWI. There has been a full recovery, Mahfood said, pointing to the $501 million of profit made so far this year, over nine months ending June.